What’s the weather forecast?
The weather forecast for September 19–25, 2016, indicates that temperatures in the United States could remain higher than the five-year average for the same period.
El Niño anomalies
Natural gas use for heating during the 2015–2016 winter season was low due to mild weather. El Niño’s intensity kept temperatures warmer than normal. As a result, at the end of March 2016, US natural gas inventories were at 2.5 trillion cubic feet. That’s 67% higher than their 2015 levels and 53% higher than their five-year average.
In the week ended September 16, 2016, temperatures were higher than had been forecast. Natural gas futures rose 5.4% that week.
On September 15, 2016, the EIA (U.S. Energy Information Administration) announced a 62 Bcf (billion cubic feet) addition to natural gas inventory levels in the week ended September 9, 2016. The market had expected an addition of 60 Bcf to the inventory, according to a report by the Wall Street Journal.
The effect on ETFs
The above analysis could be important for natural gas–tracking commodity ETFs such as the ProShares Ultra Bloomberg Natural Gas ETF (BOIL), the Direxion Daily Natural Gas Related Bear 3X ETF (GASX), and the Direxion Daily Natural Gas Related Bull 3X ETF (GASL).
In the next part of this series, we’ll take a look at the recent impact of crude oil on the S&P 500 Index (SPY) (SPXL).