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Natural Gas Prices Fall Ahead of Expiry

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Natural gas price movement

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.

Natural gas futures contracts for October delivery fell by 1.04% and closed at $2.56 per MMBtu (British thermal units in millions) on September 25, 2015. Prices fell due to oversupply concerns ahead of the natural gas October futures contracts expiry on September 28, 2015. The US benchmark following ETFs like the United States Natural Gas Fund LP ETF (UNG) mirrored the footsteps of natural gas prices in Friday’s trade. UNG fell by 1.63% and closed at $12.08 on September 25, 2015.

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Commodity Weather Group estimates mild weather across the East Coast of the US over the first week of October 2015. Power plants account for 33% and US households account for 49% of the natural gas demand. Mild weather estimates could curb the natural gas demand. It could negatively influence natural gas prices.

Last week, the EIA (U.S. Energy Information Administration) published that the natural gas in storage rose by 106 Bcf (billion cubic feet) for the week ending September 18, 2015. Industry surveys projected that the natural gas stocks might rise by 99 Bcf for the same period. The larger-than-expected inventory rise fueled pessimistic sentiments of oversupply. It weighed on natural gas prices.

On September 25, 2015, the CFTC (U.S. Commodity Futures Trading Commission) reported that hedge funds increased their net bearish positions to the highest level in the last seven days. It’s a rise of 23% for the week ending September 22, 2015—compared to the previous week. This signaled that hedge funds turned bearish towards the natural gas market. So, it might impact natural gas operators’ margins like WPX Energy (WPX), Antero Resources (AR), and EXCO Resources (XCO). These companies account for 2.64% of the SPDR Oil and Gas ETF (XOP). These companies’ natural gas production mix is greater than 86% of their total production.

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