Natural gas prices
In the last five trading sessions, natural gas (UNG) (FCG) (BOIL) (GASL) (GASX) (UGAZ) (DGAZ) December futures fell 3.7%. They closed at ~$2.7 per MMBtu (million British thermal units) on November 9, 2016—about 2.2% higher than the previous session.
On November 9, 2016, growth-driven commodities such as crude oil and natural gas recovered along with equity markets. Donald Trump’s aggressive stance to increase the production of crude oil and natural gas could be a bearish catalyst for natural gas prices. It could increase natural gas supplies, which were slowly coming back into balance. The rise in crude oil production could also have a negative impact on natural gas prices. We’ll discuss this in Part 2 of this series.
Earlier in the week, natural gas prices fell due to warmer-than-normal weather forecasts, despite the start of the winter season. It could curb the demand for natural gas for heating purposes.
Natural gas inventories
Last winter, natural gas usage for heating was weak due to mild weather. At the end of March 2016, US natural gas inventories were at 2.5 trillion cubic feet—67.0% higher than 2015 levels and 53.0% higher than their five-year average. As a result, prices were weak. Natural gas futures hit a 2016 and 17-year low of $1.64 on March 3, 2016.
During the week ending October 28, 2016, natural gas inventories were 3,963 Bcf—4.6% higher than the five-year average and 1.2% higher than last year’s level. The U.S. Energy Information Administration will announce the inventory data for the week ending November 4 on November 10, 2016.
Key moving averages
On November 9, 2016, natural gas futures were trading ~15.4% below their 100-day moving average and 13.8% below their 20-day moving average. It shows the recent bearishness in natural gas prices.
Natural gas–related sentiment impacts ETFs such as the ProShares Ultra Oil & Gas (DIG), the PowerShares DWA Energy Momentum ETF (PXI), the Vanguard Energy ETF (VDE), the iShares US Energy (IYE), and the Fidelity MSCI Energy ETF (FENY).
In the next part of this series, we’ll look at crude oil and natural gas rig counts. We’ll see how they impact natural gas production and prices.