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US Natural Gas Prices Fell despite Bullish Inventory Data

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Natural gas prices  

September natural gas futures contracts fell slightly by 0.18% and settled at $2.83 per MMBtu (million British thermal units) on August 4, 2016. Prices fell despite a surprise decline in natural gas inventories and summer weather.

The United States Natural Gas ETF (UNG) also fell by 0.59% to $8.44 on the same day.

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Weather outlook 

The latest weather reports suggest that temperatures will be hotter than normal from August 4–11, 2016, in the northern plains, Great Lakes, and the northeastern parts of the US. However, moderate temperatures should be experienced in the central parts of the US next week.

Approximately 50% of US households use natural gas for heating and cooling. Hot summer weather drives the demand for natural gas–fired electricity generation to power air conditioning. The rise in demand impacts inventories. We’ll learn more about US natural gas inventories in Part 3 of this series.

The EIA (U.S. Energy Information Administration) stated that temperatures in the Lower 48 states averaged 80 degrees for the week ending July 28, 2016. It’s the highest so far in 2016. This is five degrees higher than the normal temperatures for this period of the year.

For the week ending July 28, 2016, temperatures were three degrees more than normal—compared to the same period in 2015. The summer season will end in about four weeks. Changes in the weather have a short-term impact on natural gas prices.

Impact on stocks and ETFs

Uncertainty in oil and natural gas prices impacts natural gas producers’ earnings such as EXCO Resources (XCO) and Antero Resources (AR).

It also impacts funds such as the Direxion Daily Natural Gas Related Bull 3x Shares ETF (GASL), the PowerShares DWA Energy Momentum ETF (PXI), and the First Trust ISE-Revere Natural Gas ETF (FCG).

Series focus 

In this series, we’ll cover natural gas prices’ peaks and lows in 2016, natural gas inventories, the natural gas rig count, production, consumption, the US Commodity Futures Trading Commission’s “Commitments of Traders” report, and some price forecasts for natural gas.

In the next part, we’ll discuss US natural gas prices in the early morning trade on August 5, 2016.

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