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Natural Gas Prices Rise due to Warmer Weather Estimates

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Natural gas prices rise for the third day

August natural gas futures rose for the third consecutive day. Natural gas prices rose by 3.24% and closed at $2.86 per MMBtu (British thermal units in millions) on July 13, 2015. The consensus of rising demand due to warmer weather estimates supported the natural gas price movement. Gas tracking ETFs like the United States Natural Gas Fund LP ETF (UNG) followed the price trajectory of natural gas prices in yesterday’s trade. UNG rose by 1.53% and closed at $13.30 on July 13, 2015.

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Weather forecasting models estimated warmer weather across several parts of the US over the next two weeks. Warmer weather is also estimated in the northeastern and the midwestern parts of the US during the fourth week of July 2015, according to MDA Weather Services. The above normal weather will drive the cooling demand for air conditioning. This will boost the demand for natural gas from electric power plants.

On July 9, 2015, the EIA (U.S. Energy Information Administration) published that natural gas inventories rose by 91 Bcf (billion cubic feet) for the week ending July 3, 2015. The next EIA natural gas inventory report is expected to release on July 16, 2015. The consensus of rising inventories will continue to put pressure on natural gas prices.

This is the fifth up day for natural gas prices over the last ten days. Prices rose by 1.55% more on the up days than on down days, in the last ten days. Natural gas prices were among the top performers in Monday’s trade. Gas prices rose more than 1% YTD (year-to-date)—led by the warm weather forecast.

The exponential rise in natural gas prices benefits upstream players like REX Energy (REXX), Rossetta Resources (ROSE), and EP Energy (EPE). They account for 2.70% of the SPDR Oil and Gas ETF (XOP). These companies have a natural gas production mix that’s more than 35% of their total production.

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