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Natural Gas Prices Fall on Speculation of Slowing Demand

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Natural gas prices fall again

August natural gas futures trading in NYMEX fell by 1.73% on Wednesday. Gas prices closed at $2.78 per MMBtu (British thermal units in millions) on July 1, 2015. The speculation of slowing demand due to mild weather led to the fall in natural gas prices. ETFs like the United States Natural Gas Fund LP ETF (UNG), mirroring the price trajectory of natural gas prices, also fell yesterday. UNG fell by 1.62% and settled at $13.34 on July 1, 2015.

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The EIA (U.S. Energy Information Administration) will release the weekly natural gas storage report on July 2, 2015. Last week, the government data showed that the gas stockpile rose by 75 Bcf (billion cubic feet) for the week ending June 19, 2015. Market surveys suggest that the gas stockpile rose by 74 Bcf for the week ending June 26, 2015. The consensus of rising stocks will put pressure on natural gas prices.

Weather forecasting models estimated possible cooler weather across the Great Plains and Mid-Atlantic regions in the US. Mild weather is also expected in the Northeast and the Midwestern parts of the US for the next two weeks, according to MDA Weather Services. The consensus of mild weather estimates will curb the natural gas demand and negatively impact gas prices.

This is the fifth up day for natural gas prices in the last ten days. Prices fell by 0.66% more on the down days than on the average up days in the last ten trading sessions. Natural gas was among the worst performers in yesterday’s trade. Gas prices fell 2.56% YTD (year-to-date)—led by cooler weather forecasts.

The roller coaster ride of natural gas prices impacts oil and gas producers like Energy XXI (EXXI), Carrizo Oil & Gas (CRZO), and EP Energy (EPE). They account for 3.97% of the Spider Oil and Gas ETF (XOP). These companies also have a natural gas production mix that’s more than 35% of their total production.

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