Natural Gas Prices Hit Monthly Highs on Warmer Weather Forecasts

Natural gas price increase

August natural gas futures contracts increased by 2.71% and closed at $2.91 per MMBtu (British thermal units in millions) on Wednesday, July 15, 2015. The consensus of warmer weather forecasts supported natural gas prices. Gas-tracking ETFs like the United States Natural Gas Fund LP ETF (UNG) also followed the footsteps of natural gas prices in yesterday’s trade. The UNG ETF increased by 2.42% and closed at $13.94 on July 14, 2015.

Natural Gas Prices Hit Monthly Highs on Warmer Weather Forecasts

On July 16, 2015, the EIA (U.S. Energy Information Administration) is scheduled to release its weekly natural gas inventory report. Last week, the government data showed natural gas inventories increased by 91 Bcf (billion cubic feet) for the week ended July 3, 2015. The industry surveys suggest that natural gas inventories increased by 95 Bcf for the week ended July 10, 2015. The consensus of increasing natural gas stockpiles should pressure natural gas prices.

Weather effects

In contrast, warmer weather forecasts could support natural gas prices. MDA Weather Services reported that it predicts warmer weather across Texas and the southeastern United States between July 20 and July 24, 2015. Warmer weather should drive cooling needs for air conditioning. This effect should support demand for natural gas prices and, in turn, boost natural gas prices.

This is the fifth up day for natural gas prices in the last ten days. Prices increased by 0.75% more on up days than on down days over the last ten trading sessions. Natural gas futures were the top performer in yesterday’s trade. Prices increased by 1.21% year-to-date, led by increasing demand due to warm weather forecasts.

Upstream players like Gulfport (GPOR), Bill Barrett (BBG), and Rossetta Resources (ROSE) benefit from increasing natural gas prices. Combined, they account for 2.70% of the SPDR Oil and Gas ETF (XOP). These companies’ gas production mix is more than 35% of their production portfolio.