uploads///Natural Gas Outperform the SP  and Crude Oil

Natural Gas Keeps Outperforming Broader Markets and Crude Oil

By

Jun. 28 2016, Updated 2:05 a.m. ET

Natural gas and the S&P 500 index

For the week ended June 24, 2016, July natural gas futures (UNG) (FCG) rose by 1.5%. The S&P 500 Index (SPY) (QQQ) fell by 1.6%. Among the SPDR ETFs, the Utilities Select Sector SPDR ETF (XLU) fell the most. Between June 17 and June 24, XLU fell by 1.3%. However, following the United Kingdom vote to exit the European Union, utilities rose 0.56% as investors took a defensive position.

Again, the Fed kept the key interest rate unchanged on June 15. This followed weak US non-farm payroll data on June 3. The lack of an increase helped utility stocks to rise. Lower interest rates make utility stocks attractive.

Article continues below advertisement

Natural gas and crude oil

Crude oil futures (USO) fell by 0.71% for the week ended June 24, 2016. On June 8, crude oil futures were at their 2016 high after oil inventories fell by 3.2 million barrels for the week ended June 3. On June 24 after the Brexit decision, oil prices fell 4.9%, erasing all the weekly gains.

Why natural gas beat the broader market and crude oil

Last week, July natural gas futures contracts (GASL) (FCG) rose by 1.5%. The rise in natural gas prices was due to higher temperatures, which boosted natural gas usage for cooling purposes although inventory additions were higher than expected for the week ended June 17.

On June 23, the EIA (U.S. Energy Information Administration) announced a 62 Bcf (billion cubic feet) addition to natural gas (UNG) (GASL) inventory levels for the week ended on June 17. Analysts expected an addition of 61 Bcf, according to S&P Global Platts.

The rise in natural gas prices could be a key catalyst for natural-gas-weighted stocks such as Gulfport Energy (GPOR), Comstock Resources (CRK), and Ultra Petroleum (UPL).

Advertisement

More From Market Realist