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Natural Gas Prices Rose Due to Strong Demand

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Natural gas prices rally 

Natural gas futures for December delivery rose by 4.5% and settled at $2.36 per MMBtu (British thermal units in millions) on Thursday, November 5, 2015. Prices rose for the second day due to a less-than-expected rise in the natural gas inventory data. ETFs like the United States Natural Gas ETF (UNG) moved in the direction of US natural gas prices in Thursday’s trade. UNG rose by 4.6% and closed at $10.01 on November 5, 2015.

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Inventory

On Thursday, November 5, 2015, the EIA (U.S. Energy Information Administration) released the natural gas stockpile report. The report showcased that the natural gas stockpile rose by 52 Bcf (billion cubic feet) for the week ending October 30, 2015. A Bloomberg survey projected that the natural gas stockpile could rise by 57 Bcf for the same period. The less-than-expected rise boosted natural gas prices in Thursday’s trade. A rise in natural gas prices benefits large natural gas producers like EOG Resources (EOG), Devon Energy (DVN), Chesapeake Energy (CHK), and Anadarko Petroleum (APC). Read the next part of the series for more news on the natural gas stockpile.

Natural gas prices rose from the record low on October 27, 2015, due to lower natural gas prices and bottom fishing. The winter weather outlook also contributed to the rise in natural gas prices. However, the outlook has been fluctuating between mild and cold winter forecasts. The El Nino weather pattern is driving the winter to warmer-than-normal temperatures compared to last year. Meanwhile, bullish traders predict a cold winter this year. In contrast, Commodity Weather Group estimates warmer weather over the next two weeks across North Dakota, South Dakota, and the East Coast of the US.

Volatility

December natural gas futures were the top performer with respect to other commodities in yesterday’s trade. It’s the sixth up day for natural gas prices in the last ten days. Gas prices fell by 2.6% more on the average up days than on the average down days. Prices fell by 18.1% YTD (year-to-date) due to oversupply concerns. The uncertainty in the oil and gas market impacts ETFs like the Guggenheim S&P Equal Weight Energy ETF (RYE) and the First Trust Energy AlphaDEX ETF (FXN).

In this series, we’ll look at natural gas prices and fundamentals. For an in-depth look at oil and gas as well as related companies, sectors, and drivers, please visit Market Realist’s Energy and Power page.

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