Natural gas price action
The NYMEX-traded[1. New York Mercantile Exchange] natural gas futures contracts for January delivery settled at $2.07 per MMBtu (British thermal units in millions) on December 9, 2015. Prices were flat for the third straight day despite the consensus of falling natural gas inventory. Also, ETFs like the United States Natural Gas ETF (UNG) fell slightly in the direction of natural gas prices in yesterday’s trade. The UNG ETF fell slightly by 0.62% and closed at $8.06 on December 9, 2015.
Reports and expectations
On December 10, 2015, the EIA (U.S. Energy Information Administration) will publish its weekly natural gas stockpile report. Natural gas in storage fell by 53 Bcf (billion cubic feet) for the week ending November 27, 2015, as per the EIA’s sources. Also, the market surveys from Reuters suggest that the natural gas inventory might fall by 64 Bcf for the week ending December 4, 2015. The consensus of the falling inventory could support natural gas prices. However, natural gas prices are already so beaten down that they have been almost flat for the last three days. To know more about inventory visit the next part of the series.
Meanwhile, the latest forecasting updates suggest that weather would be milder for the coming weeks in December 2015. An important note here is that 49% of US households use natural gas for heating. Clearly, mild winter weather curbs heating needs and negatively affects natural gas prices.
The heating degree days were at 152 last week compared to 148 during the same period last year. Higher heating degree days suggest a cold climate that needs more heating to maintain warm room temperatures. The 30-year average heating degree days are at 156. The below-normal winter weather forecast is affecting the demand of natural gas.
This is the fifth down day for natural gas prices over the last ten trading sessions. Prices fell by 0.4% more on the average down days than on the average up days during the same period. Natural gas prices are following the long-term bearish trend. Prices fell more 22% YTD (Year-to-date) due to oversupply concerns. The fall in natural gas prices affects natural gas producers like ConocoPhillips (COP), Cimarex Energy (XEC), Exco Resources (XCO), and Devon Energy (DVN). The prices also affect ETFs like the Guggenheim S&P 500 Equal Weight Energy ETF (RYE) and the First Trust Energy AlphaDEX ETF (FXN).