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Natural Gas Prices Rally by 14%

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Natural gas price movement 

January natural gas futures contracts trading on NYMEX rose by 2.3% to close at $2.03 per MMBtu (British thermal units in millions) on Thursday, December 24, 2015. Prices rose due to a greater-than-expected fall in natural gas inventory. The United States Natural Gas Fund (UNG) mirrored the price path of US natural gas prices on Thursday, rising by 1.3% to close at $7.69. In contrast, the SPDR S&P 500 ETF (SPY) fell by 0.16% on the day.

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Inventory report 

The EIA (U.S. Energy Information Administration) released its weekly natural gas inventory report on December 24, 2015. The data showed that the US natural gas inventory fell by 32 Bcf (billion cubic feet) for the week ending December 18, 2015. The greater-than-expected fall in natural gas inventory boosted natural gas prices. As a result, natural gas prices surged on Thursday. For the week, US natural gas prices rose by 14.3% due to the drop in inventory and the cold winter weather forecast. To learn more about inventory, continue to the next part of this series.

Weather BELL Analytics has reported that the weather will be colder than normal for the East Coast, Georgia, and Pennsylvania this week. The weather is also expected to be cold across the Rockies and Texas. Approximately 50% of US households use natural gas for heating purposes. Cold winter weather could drive heating demand and benefit gas prices.

Impact 

US natural gas prices have fallen by 30% so far in 2015 and 10% in December 2015 due to record inventory and weak demand. The record-low gas prices affect US natural gas producers like EXCO Resources (XCO), Gulfport Energy Corporation (GPOR), Rice Energy (RICE), Cimarex Energy (XEC), and Southwestern Energy Company (SWN). ETFs such as the PowerShares DB Energy Fund (DBE) and the PowerShares DWA Energy Momentum Portfolio (PXI) are also impacted by the uncertainty in the oil and gas market.

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