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EIA Report Supports Natural Gas Prices Last Week

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Sep. 15 2015, Published 1:34 p.m. ET

Natural gas prices

Natural gas prices rose ~1.05% between Friday, September 4, and Thursday, September 10. Prices closed at $2.683 per MMBtu (British thermal units in millions) on September 10. On September 4, prices closed at $2.655 per MMBtu.

Higher natural gas prices are positive for natural gas producers such as Chesapeake Energy (CHK), Southwestern Energy (SWN), QEP Resources (QEP), and Cabot Oil & Gas (COG). These companies make more money when natural gas prices rise. All of these companies combined make up ~2% of the Vanguard Energy ETF (VDE).

With higher prices, natural gas producers may be inclined to produce more. This would in turn be positive for the energy MLP sector, which includes companies such as MarkWest Energy Partners (MWE). Higher production would mean higher volumes to transport, which could boost MLP revenues.

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Price movements

Natural gas prices on Tuesday, September 8 rose ~2% from the previous Friday’s closing price of $2.655 per MMBtu. Prices settled at $2.71 per MMBtu. They rose as a result of hot weather forecasts. Hot temperatures increase the demand for natural gas for electricity generation needed for cooling purposes. US markets were closed on Monday due to Labor Day.

However, prices fell on Wednesday as a result of seasonal or normal weather forecasts. Prices fell by 2.18% to settle at $2.651 per MMBtu.

On Thursday, prices rose following a bullish EIA (US Energy Information Administration) report. The report showed a smaller-than-expected storage inventory number, as we saw in the previous part of this series. Prices rose 1.21% to close at $2.683 per MMBtu.

Natural gas prices remained flat on Friday, September 11, trading near ~$2.681 per MMBtu early in the day.

In the next part of this series, we’ll see how various securities that are exposed to natural gas performed last week.

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