The US government’s global forecast model estimates that the weather would be colder than normal in November 2015. MDA Weather Services reported cold winter across the Midwest and mid-Atlantic regions of the US during the middle of November. In contrast, Commodity Weather Group reported that warmer weather could be experienced across North Dakota, South Dakota, and the East Coast over the next few weeks. El Nino is driving the winter to warmer-than-normal temperatures compared to last year.
The EIA (U.S. Energy Information Administration) estimates that the heating degree days will likely be less this winter compared to last year. It’s important to note that 49% of US households use natural gas for heating purposes during the winter. A cold winter could drive the heating needs and benefit natural gas prices in the short term.
Natural gas inventory
The EIA released its natural gas inventory report on November 5, 2015. The data highlighted that the natural gas inventory rose by 52 Bcf (billion cubic feet) to 3,929 Bcf for the week ending October 30, 2015. The natural gas inventory rose for the 31st consecutive week for the week ending October 30, 2015. Currently, the natural gas inventory is 10% more than the level of 3,558 Bcf in 2014. It’s also 3.9% more than the five-year average level of 3,782 Bcf. The next report is scheduled on November 13, 2015. The consensus of rising natural gas stocks will continue to push natural gas prices lower.
Falling natural gas prices impact US upstream players like Chesapeake Energy (CHK), Newfield Exploration (NFX), Range Resources (RRC), Devon Energy (DVN), and Memorial Resource Development (MRD). These stocks’ natural gas output mixes are greater than 40% of their total production. ETFs like the PowerShares DB Energy ETF (DBE) and the PowerShares DWA Energy Momentum ETF (PXI) are also affected by the uncertainty in the natural gas market.