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Natural Gas Prices Slump after the EIA Inventory Release

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Natural gas price drop

Natural gas futures contracts for August delivery increased by 2.71% and settled at $2.85 per MMBtu (British thermal units in millions) on July 16, 2015. The better-than-expected inventory increase led to a decline in natural gas prices. ETFs like the United States Natural Gas Fund LP ETF (UNG) also declined in the direction of natural gas prices at the close of trade yesterday. UNG dropped by 1.43% and settled at $13.74 on July 16, 2015.

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Yesterday, the EIA (U.S. Energy Information Administration) published its natural gas in storage report. The data showed that natural gas stocks increased by 99 Bcf for the week ended July, 10, 2015. Market surveys expected that natural gas stocks could increase by 95 Bcf over the same period. The better-than-expected inventory increase led to the decline in natural gas prices.

Warmer weather is expected across several regions of the United States as per the latest forecasting models through July 24, 2015. Mild weather was forecasted previously during this period.

Natural gas prices declined for the fifth time in the last ten trading sessions. Gas prices rose by 0.25% more on up days than on down days over the same period. August natural gas futures were among the worst performers across all other commodities in yesterday’s trade. Prices dropped by 1.51% year-to-date, led by record natural gas inventories.

Impact

The roller coaster ride of natural gas prices affects oil and gas producers like WPX Energy (WPX), Bill Barrett (BBG), and Rosetta Resources (ROSE). These stocks account for 2.49% of the SPDR Oil and Gas ETF (XOP). The natural gas production mix of these companies is greater than 35% of their total production.

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