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How Long Could the Weather Influence Natural Gas Prices?

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Weather estimates

MDA Weather Services estimates that warm weather could be experienced across the Northeast, mid-Atlantic, and Midwest regions of the US from August 15–24, 2015. In contrast, mild weather is estimated across the Great Lakes, Northeast, and Northwest parts of the US through August 20, 2015. The warm weather could support natural gas demand and natural gas prices. As a result, rising natural gas inventories could slow down in the near term. The weather-related price spike is short term in nature.

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EIA inventory report 

The EIA (U.S. Energy Information Administration) reported that the natural gas in storage rose by 32 Bcf (billion cubic feet) to 2,912 Bcf for the week ending July 31, 2015. The natural gas stockpile rose for the 18th straight week for the week ending July 31, 2015. The market consensus projected that the natural gas stockpile could rise by 43 Bcf over the same period. The next EIA report will release on August 13, 2015. The estimates of rising inventories could negatively affect gas prices.

The rising natural gas stockpile implies that supply is rising or demand is falling. As a result, it might be negative for natural gas prices.

Upstream producers like Antero Resources (AR), EQT (EQT), and Newfield Exploration (NFX) benefit from rising natural gas prices. These companies account for 3.25% of the Spider Oil and Gas ETF (XOP). These companies’ natural gas production mix is more than 46% of their production portfolio. Rising gas prices also benefit oil and gas ETFs like XOP and the Energy Select Sector SPDR ETF (XLE).

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