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Weather Is Driving Natural Gas Prices

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Aug. 31 2015, Updated 2:06 p.m. ET

Weather estimates

Commodity Weather Group estimates that there will be warm weather in the midwestern and northeastern parts of the US over the next week. The reports added that the southern and western parts of the US might also experience warm weather over the same period. In contrast, mild weather is estimated across the Great Lakes region in the US.

AccuWeather Group expects warm weather across New York at the end of August 2015. The warm weather this summer hasn’t been able to draw down the surging inventories due to oversupply concerns. The record inventories will continue to put pressure on natural gas prices despite the beginning of the winter season.

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The EIA (U.S. Energy Information Administration) estimates that natural gas consumption could average around 76.5 Bcf (billion cubic feet) per day in 2015 and 2016. In contrast, natural gas production is seen at 78.52 Bcf per day in 2015 and 80.52 Bcf per day in 2016, respectively. The widening gap between supply and demand could negatively influence natural gas prices despite the weather consensus in the long run.

The roller coaster ride of natural gas prices impacts crude oil and natural gas exploration and production companies like Antero Resources (AR), Range Resources (RRC), and ExxonMobil (XOM). They account for 2.80% of the SPDR Oil and Gas ETF (XOP). These companies’ natural gas production mix is more than 46% of their total production.

They also influence oil and gas ETFs like XOP and the Energy Select Sector SPDR ETF (XLE).

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