US natural gas prices
NYMEX near-month Henry Hub natural gas futures contracts fell in the week ending April 15, 2016, after rallying for two consecutive weeks. Natural gas prices fell 4.4% to close at $1.90 per MMBtu (British thermal units in millions) on April 15. Prices rose 1.7% in the previous week and closed at $1.99 per MMBtu. Natural gas futures fell on April 14 and 15 despite a slightly bullish inventory report released on April 14.
According to the weekly report from the EIA (U.S. Energy Information Administration), US natural gas stocks posted a net withdrawal of 3 Bcf (billion cubic feet) for the week ending April 8—compared to the five-year average net injection of 19 Bcf. This resulted in a decline in the natural gas surplus compared to the five-year average. Generally, April marks the beginning of the natural gas injection season in the US.
The above graph shows the weekly near-month natural gas futures prices at Henry Hub—the national benchmark for US natural gas prices.
Impact on MLPs
There are two ways that natural gas prices impact energy MLPs:
- The first way is direct. This is mostly relevant for MLPs involved in natural gas sales, gathering, and processing. MLPs with natural gas gathering and processing assets include Enable Midstream Partners (ENBL), Tallgrass Energy Partners (TEP), MLPLX LP (MPLX), and Summit Midstream Partners (SMLP). MPLX forms 6.3% of the Alerian MLP ETF (AMLP). AMLP is an ETF that invests in the top energy sector MLPs.
- The second way is indirect. Sustained low prices impact production and natural gas throughput volumes. At the same time, low natural gas prices lead to higher demand from utilities and industrial customers. The gross natural gas production fell by 1.5% for the week ending April 13, 2016—compared to the same time last year.
What we’ll cover in this series
Monitoring MLP sector indicators can help investors understand MLPs’ performances. It can also help investors predict MLPs’ future performances. This weekly series will keep you updated on the latest developments in the MLP energy sector. The series covers movements in key indicators that impact MLPs’ performances to help you make informed decisions about your investments.
In the next part of this series, we’ll look at how natural gas prices impact MLPs.