Natural gas prices rally
Natural gas futures trading in NYMEX for July delivery increased by 4.44% on Monday. Prices increased on the consensus of warmer weather forecasts and closed at $2.70 per MMBtu (British thermal units in millions) on June 8, 2015. Natural gas following ETFs like the United States Natural Gas Fund LP ETF (UNG) also rallied in Monday’s trade. UNG rose by 4.63% and settled at $13.12 in Monday’s trade.
The consensus of rising demand due to warmer weather supported gas prices. Warmer weather increases the need for cooling. As a result, the demand for natural gas from natural gas powered electric power plants increases. Commodity Weather Group published that the weather in the Midwest and Mid-Atlantic parts of the US is estimated to be higher in the next week of June 2015.
On June 4, 2015, the EIA (U.S. Energy Information Administration) reported that the weekly inventory increased by 132 Bcf (billion cubic feet) for the week ending May 29, 2015. The EIA will release the next stockpile report on June 11, 2015. The estimates of increasing inventories will put pressure on natural gas prices.
Natural gas prices increased for the sixth time in the last ten trading sessions. Over the same period, prices dropped by 2.70% more on the average down days than on the average up days. Natural gas futures for July delivery were the top performer in Monday’s trade. Oil prices fell by more than 6% YTD (year-to-date)—led by mild weather forecasts.
Higher natural gas prices benefit energy companies like EQT (EQT), Devon Energy (DVN), and Energy XXI (EXXI). Combined, they account for 4.27% of the Spider Oil and Gas ETF (XOP). These companies have a natural gas production mix that’s greater than 43% of their total production.