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Natural Gas Prices Hit a 4-Week Low due to Lower Demand Estimates

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Natural gas prices fall for the second day

August natural gas futures contracts trading in NYMEX fell for second day by 1.45% on Tuesday. Gas prices closed at $2.71 per MMBtu (British thermal units in millions) on July 7, 2015. The slowing demand, due to mild weather estimates, led to the fall in natural gas prices. ETFs like the United States Natural Gas Fund LP ETF (UNG) followed the footsteps of natural gas prices in yesterday’s trade. UNG fell by 1.13% and closed at $13.06 on July 7, 2015.

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A cooler weather forecast across several regions in the US led to the slowing demand for natural gas. Mild weather will curb the cooling needs. This will result in lower demand from electric power plants. In turn, this will negatively impact natural gas prices. Various weather forecasting models are expecting normal weather for the next two weeks.

Last week, the EIA (U.S. Energy Information Administration) reported that the natural gas in storage rose by 69 Bcf (billion cubic feet) for the week ending June 26, 2015. The next EIA report is scheduled to release on Thursday, July 9, 2015. Market surveys suggest that gas stocks could have risen by 85 Bcf for the week ending July 3, 2015. The rising stockpile might be negative for natural gas prices.

This is the sixth down day for natural gas prices in the last ten days. Prices fell by 0.78% more on the down days than on the average up days, over the same period. Natural gas futures for August delivery performed poorly against all of the other commodities in Tuesday’s trade. Prices fell more than 5% YTD (year-to-date)—led by the slowing demand consensus.

The long-term downward trend of natural gas prices impacts oil and gas producers like Concho Resources (CXO), QEP Resources (QEP), and EP Energy (EPE). These companies have a gas production mix that’s greater than 35% of their production portfolio. They account for 3.26% of the Spider Oil and Gas ETF (XOP).

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