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Last Week’s Natural Gas Consumption: Bullish or Bearish for Prices?

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Weekly US natural gas consumption

Market intelligence company Pointlogic reported that US natural gas consumption rose 2.6% between October 27 and November 2, 2016. However, it fell 4% compared to the same period in 2015. The fall in consumption is a key bearish driver for natural gas prices.

Lower natural gas prices can have a negative impact on the profitability of oil and gas producers such as Cimarex Energy (XEC), Memorial Resources (MRD), and Kosmos Energy (KOS).

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Gas deliveries to the power sector rose 5.2% week-over-week and 0.8% year-over-year. To find out what drives the power sector’s natural gas consumption, read part one of this series. Natural gas deliveries to the residential and commercial segments fell week-over-week and YoY. Gas flows to the industrial sector also fell week-over-week and YoY.

Gas exports to Mexico were flat at 3.3 Bcf (billion cubic feet) per day week-over-week, but rose 6.5% YoY.

US natural gas consumption estimates 

The EIA (U.S. Energy Information Administration) estimates that US natural gas consumption could average 75.9 Bcf (billion cubic feet) per day in 2016, 76.7 Bcf per day in 2017, and 78.4 Bcf per day in 4Q16. US natural gas consumption averaged 74.8 Bcf per day in 2015. For updates on natural gas supplies, read the previous part of this series.

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Impact 

Demand from the industrial and residential segments could drive demand for natural gas in 2017. High demand should support natural gas prices.

High natural gas prices can have a positive impact on the earnings of oil and gas producers such as Cimarex Energy (XEC), Memorial Resource Development (MRD), and Kosmos Energy (KOS). We’ll take a closer look at natural gas price forecasts in the final part of this series.

The roller coaster ride in crude oil and natural gas prices impacts funds such as the Direxion Daily Natural Gas Related Bull 3X ETF (GASL), the United States Natural Gas ETF (UNG), the VelocityShares 3x Inverse Natural Gas ETN (DGAZ), the SPDR S&P Oil & Gas Exploration & Production ETF (XOP), the PowerShares DWA Energy Momentum ETF (PXI), the VelocityShares 3x Long Crude Oil ETN (UWTI), and the Vanguard Energy ETF (VDE).

In the next part of this series, we’ll take a look at the U.S. Commodity Futures Trading Commission’s Commitment of Traders report.

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