Why Did Volatility Impact Natural Gas Prices?



Volatility and natural gas

The volatility and price movement study of natural gas (UGAZ) futures show that whenever prices rose, it’s a good exit point for energy investors. A rise in volatility indicates the expectation of sharp movement in prices either upward or downward. Near January in 2015 and 2016, volatility rose sharply because a lot of news-related data impacted its prices. The following graph shows the natural gas price movement and its 30-day volatility.

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Natural gas tracking ETF

The United States Natural Gas Fund (UNG) also exhibited the same trend. Volatility was sharp in first three months of 2015 and 2016. It outlines the importance of the end of the winter season. It shows the levels of stockpiles left over at the end of the heating season.

Natural gas weighted stock

The rise in volatility in natural gas can impact natural gas weighted producer stocks such as EQT (EQT), Cabot Oil & Gas (COG), and Rice Energy (RICE). These stock operate with a production mix of greater than 80% natural gas.


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