Natural gas price movement
February natural gas futures contracts fell by 2.9%. They were trading at $2.26 per MMBtu (British thermal units in millions) on January 4, 2015. Meanwhile, US natural gas prices fell by 19% in 2015. US natural gas prices fell for the second straight year due to oversupply concerns. ETFs like the United States Natural Gas ETF (UNG) followed the prices trajectory of natural gas prices in 2015. UNG fell by 42% in 2015.
The latest forecasting models suggested that the heating degree days would be at 470 for the next 15 days in the lower 48 states of the US. The heating degree days are usually at 461 during this time of the year. The higher heating degree days suggest a cold winter and higher demand for natural gas for heating purposes. However, a weather-related spike in natural gas prices is short term in nature.
Last week, the EIA (U.S. Energy Information Administration) reported that the US weekly natural gas inventory fell by 58 Bcf (billion cubic feet) for the week ending December 25, 2015. The larger-than-expected natural gas inventory fall led to the rise in prices last week. We’ll discuss the inventory more in the next part of the series. However, the long-term oversupply led to the fall in natural gas prices for the second year. In 2014, natural gas prices fell by 32%.
The current natural gas prices are trading close to a 16-year low. The low natural gas prices negatively impact US natural gas producers like Rice Energy (RICE), EXCO Resources (XCO), Anadarko Petroleum (APC), Newfield Exploration (NFX), Rex Energy (REXX), and Gulfport Energy (GPOR). The roller coaster ride in the oil and gas market also impacts ETFs like the Fidelity MSCI Energy ETF (FENY), the PowerShares DB Energy ETF (DBE), and the PowerShares DWA Energy Momentum ETF (PXI).