US natural gas prices
US natural gas prices fell ~1.52% between Friday, September 11, and Thursday, September 17. Prices closed at $2.652 per MMBtu (British thermal units in millions) on September 17. On September 4, prices closed at $2.693 per MMBtu.
Lower natural gas prices are negative for natural gas producers such as Chesapeake Energy (CHK), Southwestern Energy (SWN), QEP Resources (QEP), and Cabot Oil & Gas (COG). These companies make less money when natural gas prices fall. All these companies combined make up ~2% of the Vanguard Energy ETF (VDE).
With lower prices, natural gas producers may be inclined to produce less. This would in turn be negative for the energy MLP sector, which includes companies such as MarkWest Energy Partners (MWE). Lower production would mean lower volumes to transport, which could hurt MLP revenues.
US natural gas weekly price recap
US natural gas prices on Monday, September 14, rose ~2.41% from the previous Friday’s closing price of $2.693 per MMBtu. Prices settled at $2.758 per MMBtu. They rose as a result of hot weather forecasts for the coming two weeks. Hot temperatures increase the demand for natural gas for electricity generation needed for cooling purposes.
However, prices fell on Tuesday as supply concerns weighed on the market. Prices fell by 1.08% to settle at $2.728 per MMBtu.
Supply concerns continued to pressure prices on Wednesday as well and fell by 2.5% to settle at $2.728 per MMBtu.
On Thursday, prices fell following a neutral EIA (U.S. Energy Information Administration) report. The report showed that storage inventory numbers were in line with market expectations, as we saw in the previous part of this series. The fact that inventories have been outpacing the five-year average for more than three months is also a likely cause for the fall in prices. Prices fell 0.3% to close at $2.652 per MMBtu.
Prices were holding near the same levels in early Friday trade.
In the next part of this series, we’ll see how various securities that are exposed to natural gas performed last week.