Natural gas prices rise
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 rose by 2.91% and closed at $2.72 per MMBtu (British thermal units in millions) on Thursday, September 3, 2015. Prices rallied due to speculation of an increase in demand for natural gas due to the warm weather forecast. ETFs like the United States Natural Gas Fund LP ETF (UNG) also followed the footsteps of natural gas prices in yesterday’s trade. UNG rose by 3% and settled at $12.84 on September 3, 2015.
On September 3, 2015, the EIA (U.S. Energy Information Administration) released the weekly natural gas stockpile report. The EIA’s report showed that the natural gas inventory rose by 94 Bcf (billion cubic feet) for the week ending August 28, 2015. Market surveys projected that natural gas inventories could rise by 90 Bcf for the same period. Natural gas prices have been volatile ahead of the larger-than-anticipated rise in natural gas stocks.
MDA Weather Services estimates that warm weather is expected across the Rocky Mountains to the East Coast over the next few days. Warm weather will increase the demand for natural gas from electric power plants. This might draw down natural gas stocks and benefit natural gas prices.
Natural gas prices rose for the fifth time in the last ten days. Prices fell by 0.40% more on the down days than on the up days in the last ten trading sessions. Gas futures were the top performers across other commodities in yesterday’s trade. Prices fell more than 6% YTD (year-to-date)—led by rising inventory.
The rise in natural gas prices benefits upstream players like Cabot Oil & Gas (COG), Southwestern Energy (SWN), and Rice Energy (RICE). Combined, they account for 2.78% of the SPDR Oil and Gas ETF (XOP). These stocks’ natural gas production mix is more than 86% of their production portfolio.