Natural gas prices
In the last five trading sessions, natural gas (UNG) (BOIL) January futures fell 1.7%. They closed at ~$3.54 per MMBtu (million British thermal units) on December 14, 2016—about 1.9% higher than the previous session.
Recent softness in natural gas prices could be due to moderating temperatures. The 6.4% fall in natural gas prices on December 12, 2016, coincided with forecasts of higher temperatures in the coming weeks. As the weather moderates, natural gas usage could fall as heating needs decrease. It could lead to a fall in natural gas inventories’ current pace. For the week ending December 2, natural gas inventories fell by 42 Bcf (billion cubic feet).
Natural gas inventories
Last winter, natural gas usage for heating was weak due to mild temperatures. 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 the five-year average. As a result, prices were weak. Natural gas futures hit a 17-year low of $1.64 on March 3, 2016.
During the week ending December 2, 2016, natural gas inventories were 3,953 Bcf—6.9% higher than the five-year average and 1.3% higher than last year’s level. On December 15, 2016, the EIA (U.S. Energy Information Administration) will announce its inventory data for the week ending December 9, 2016.
Key moving averages
On December 14, 2016, natural gas futures were trading ~3.5% above their 100-day moving average and 5.5% above their 20-day moving average. It shows the recent bullishness 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.