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Natural Gas Prices Are Volatile Due to the Weather Forecast

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Natural gas prices

This series analyzes natural gas prices and fundamentals. For an in-depth fundamental look at oil and gas and related companies, sectors, and drivers, please refer to our Energy and Power page.

September natural gas futures trading in NYMEX fell marginally by 0.53% and closed at $2.79 per MMBtu (British thermal units in millions) on August 7, 2015. Prices fell due to oversupply concerns and the mild weather forecast. Gas tracking ETFs like the United States Natural Gas Fund LP ETF (UNG) also followed the price trajectory of natural gas prices. UNG fell by 0.53% and closed at $13.41 on August 7, 2015.

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Last week, the EIA (U.S. Energy Information Administration) published that the natural gas stockpile rose by 32 Bcf (billion cubic feet) for the week ending July 31, 2015. The estimates of rising inventories negatively impact natural gas prices.

The latest weather report suggests that the Great Lakes, Northeast, and Northwest parts of the US might experience mild weather through August 20, 2015. The mild weather forecast could curb air conditioning needs. In turn, it will curb the demand from natural gas. It will affect natural gas prices.

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This is fourth up day for natural gas prices in the last ten trading sessions. Over the same period, prices fell by 0.70% more on the down days than on the up days. September natural gas prices fared poorly against other commodities in Friday’s trade. Prices fell by 1.66% YTD (year-to-date)—led by the rising natural gas inventory.

Upstream players like Rice Energy (RICE), Antero Resources (AR), and Southwestern Energy (SWN) are affected due to the volatility of natural gas prices. Combined, these companies account for 2.66% of the SPDR Oil and Gas ETF (XOP). These stocks’ natural gas production mix is greater than 86% of their production portfolio.

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