Natural gas prices
April natural gas futures contracts trading on NYMEX (New York Mercantile Exchange) rose by 1.1% and closed at $1.81 per MMBtu (million British thermal units) on March 24, 2016. Gas prices rose due to the cold weather outlook for the week ahead. Gas tracking ETFs like the United States Natural Gas ETF (UNG) rose by 1.6% to $6.4 on the same day. In contrast, the SPDR S&P 500 ETF (SPY) fell by 0.1% to $203.11 on March 24.
The latest weather forecasting models suggest several parts of the US could see cold weather over the next week. Weather in the Midwest US is expected to be colder, but it could be milder than normal the following week. 50% of US homes use natural gas for heating. Cold weather forecasts will drive heating demand and benefit natural gas prices. In contrast, mild weather is expected in the Eastern and central parts of the US. The US natural gas inventory report also boosted natural gas prices on March 24, 2016. The next part of the series will focus on natural gas inventory.
Natural gas price volatility
Natural gas prices hit monthly highs of $1.94 per MMBtu on March 17, 2016, due to short covering and bullish crude oil prices. To learn more, read Bull Market: Crude Oil Prices Trade at 2016 Highs and Are Crude Oil Traders the Bullish Catalyst for the Global Oil Market?. The uptick in natural gas prices benefits natural gas producers like Antero Resources (AR), Range Resources (RRC), Gulfport Energy (GPOR), Cabot Oil & Gas (COG), and Comstock Resources (CRK).
In contrast, natural gas prices tested a 17-year low on February 28, 2016, due to mild winter weather in 2015–2016 compared to 2014–2015 and an oversupply. The US mild winter weather was due to the El Niño weather pattern. Secondly, US natural gas production hit its highest level ever in February 2016. In this series, we’ll go into detail about the US natural gas production, consumption, inventory, rig count, and price forecast.
Gas prices have lost 40% since May 2015. They have lost 23% year-to-date (or YTD). The volatility in natural gas prices also affects ETFs and ETNs like the Fidelity MSCI Energy ETF (FENY), the PowerShares DB Energy Fund (DBE), and the VelocityShares 3x Inverse Natural Gas ETN (DGAZ).