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Natural Gas Prices Are Volatile Due to the Weather Report

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Natural gas price movement 

December natural gas futures trading in NYMEX rose slightly by 0.40% and closed at $2.26 per MMBtu (British thermal units in millions) on November 4, 2015. Prices rose due to cooler weather estimates. The US benchmark following ETFs like the United States Natural Gas ETF (UNG) moved in the price trajectory of natural gas prices in Wednesday’s trade. UNG rose by 0.10% and settled at $9.57 at the close of trade on November 4, 2015.

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Weather update

AccuWeather stated that cold weather could be experienced over the next week in the US. Commodity Weather Group added that colder-than-normal winter weather could be experienced in the coming weeks. The Northern Plains and Midwest regions of the US will likely experience cold weather this weekend. US households use 49% of the natural gas for heating needs. The cold winter will drive demand for natural gas. It will benefit natural gas prices.

Meanwhile, the EIA (U.S. Energy Information Administration) will publish its weekly natural gas in storage report on Thursday, November 5, 2015. The government data showed that natural gas stocks rose by 63 Bcf (billion cubic feet) for the week ending October 23, 2015. The recent surveys suggest that natural gas stocks could rise by 57 Bcf for the week ending October 30, 2015. The estimates of rising natural gas stocks could push natural gas prices lower. Read the next part of the series for more updates on the natural gas inventory.

Volatility analysis

This is the sixth up day for natural gas prices over the last ten trading sessions. Prices fell by 3.7% more on the average up days than on the average down days over the same period. Natural gas futures fared well against all of the other commodities in yesterday’s trade. Prices fell more than 20% YTD (year-to-date) due to rising production and weak demand. The volatility in the energy market impacts ETFs like the First Trust Energy AlphaDEX ETF (FXN) and the Guggenheim S&P Equal Weight Energy ETF (RYE). It also impacts oil and gas producers like Chesapeake Energy (CHK), EXCO Resources (XCO), Devon Energy (DVN), and Anadarko Petroleum (APC).

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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