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Natural Gas Prices Slump: Consensus of Massive Stockpile Buildup

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Natural gas prices decline

NYMEX-traded natural gas futures contracts for July delivery fell by 2.37% on Wednesday. Prices slumped due to massive stockpile data suggesting slowing demand. Gas futures settled at $2.64 per MMBtu (British thermal units in millions) on June 3, 2015. Gas tracking ETFs like the United States Natural Gas Fund LP ETF (UNG) mirrored natural gas prices and fell in Wednesday’s trade. UNG fell by 2.14% and closed at $12.80 on June 3.

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On May 28, 2015, the EIA (U.S. Energy Information Administration) published the natural gas in storage report. The data showed that the stockpile rose by 112 Bcf (billion cubic feet) for the week ending May 22. The EIA will publish the gas in storage report on Thursday, June 4, 2015. Market consensus suggests that the stockpile will increase by 118 Bcf for the week ending May 29, 2015. The rising stockpile will continue to put pressure on gas prices.

Meanwhile, mild weather estimates could also curb the demand for natural gas in the short term. This will also add pressure to natural gas prices. Commodity Weather Group expects the weather across East Coast in the US to be below normal temperatures for the next five days. However, MDA Weather Services expects that the weather will be above normal temperatures in the second week of July in the Midwestern part of the US.

Gas prices fell for the third time in the last ten days. Prices dropped by 2.91% more on the average down days than on the average up days during the same period. Natural gas prices were one of the worst performers in Wednesday’s trade. Gas prices declined more than 6% YTD (year-to-date)—led by mild weather forecasts.

Crude oil and natural gas producers like Anadarko Petroleum (APC), Exco Resources (XCO), and Energy XXI (EXXI) are impacted by lower natural gas prices. Combined, they account for 4% of the Spider Oil and Gas ETF (XOP). These stocks also have a natural gas production mix that’s greater than 43% of their total production.

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