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Warmer Weather Estimates Benefit Natural Gas Prices

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Nov. 20 2020, Updated 3:28 p.m. ET

Natural gas price action 

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.

October natural gas futures contracts trading in NYMEX rose by 2.41% and closed at $2.72 per MMBtu (British thermal units in millions) on September 14, 2015. The consensus of rising demand due to warm weather estimates supported natural gas prices. The US natural gas tracking ETFs like the United States Natural Gas Fund LP ETF (UNG) also moved in the direction of natural gas prices in yesterday’s trade. UNG rose by 2.20% and settled at $13.03 on September 14, 2015.

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WSI, a weather forecasting agency, estimates unexpected warm weather across the eastern regions of the US over the fourth week of September 2015. Likewise, Dallas might experience warmer weather over the third week of September 2015, according to AccuWeather estimates. The consensus of warm weather could boost the demand for natural gas from electric power plants. It could support natural gas prices.

The EIA (U.S. Energy Information Administration) is scheduled to release the natural gas in storage report on September 17, 2015. Last week, the EIA reported that the natural gas stockpile rose by 68 Bcf (billion cubic feet) for the week ending September 4, 2015. The less-than-expected inventory rise benefited natural gas prices.

October natural gas prices rose for the fifth time in the last ten days trading sessions. Prices rose by 0.32% more on the up days than on the down days in the last ten days. The US gas prices fared well across all of the other commodities in Monday’s trade. Prices fell more than 4% YTD (year-to-date) due to oversupply concerns.

The recent rise in natural gas prices benefits natural gas producers like Rice Energy (RICE), Antero Resources (AR), and EXCO Resources (XCO). Together, they account for 2.43% of the SPDR Oil and Gas ETF (XOP). These stocks’ natural gas production mix is more than 86% of their total portfolio.

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