Weather and Inventory Are Making Natural Gas Traders Bearish


Nov. 20 2020, Updated 1:57 p.m. ET

Weather update 

The National Oceanic and Atmospheric Administration (NOAA) reported that the weather will be milder in the lower 48 states in the next two weeks. The heating degree days are expected to be at 98 for the week ending November 27, 2015, compared to 198 during the same period last year. Fewer heating degree days suggest US households will need less natural gas to keep the room temperature warm.

Weather is expected to be milder in the northern, western, and eastern parts of the United States. Bearish traders will likely bet on mild weather and could raise their short positions as demand could drop during the peak period from November to March.

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On November 19, 2015, the EIA (U.S. Energy Information Administration) released its weekly natural gas storage report. The government agency reported that natural gas inventories beat the previous record, rising by 9 Bcf (billion cubic feet) to 4,009 Bcf for the week ending November 20, 2015. Currently, natural gas stocks are 16% higher than the 2014 level of 3,455 Bcf. They are also 6.7% more than the five-year average of 3,757 Bcf. The mild winter forecast is driving these record natural gas inventories. Rising production and weak demand are putting pressure on natural gas prices.

Record-low natural gas prices affect US natural gas producers like Rice Energy (RICE), Cabot Oil & Gas (COG), Newfield Exploration (NFX), EOG Resources (EOG), and Range Resources (RRC). The ups and downs in the oil and gas market also affect ETFs such as the PowerShares DB Energy Fund (DBE) and the PowerShares DWA Energy Momentum Portfolio (PXI).


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