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Is Trump the Key to Natural Gas Prices?

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Natural gas prices

In the past five trading sessions, natural gas (UNG) (BOIL) March futures have fallen 5.3%, closing at ~$3.17 per MMBtu (million British thermal units) on February 1, 2017—about 1.6% higher than the previous session.

The rise in natural gas prices on February 1, 2017, corresponds to the forecast of lower temperatures. However, higher temperatures led the fall in natural gas prices in the trailing week. Weather is an important driver for natural gas prices.

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Trump’s protectionism and natural gas exports

Trump’s administration could impose higher tariffs on imports from Mexico. It could also increase the trade barriers between US and Mexico that could adversely impact US natural gas exports to Mexico. In August 2016, US daily natural gas exports to Mexico through pipelines topped to ~4.3 billion cubic feet per day. However, in November 2016, it fell to ~1.8 billion cubic feet per day.

Natural gas usage in electricity generation

The EIA (Energy Information Administration) forecasts that US power producers could add 11.2 GW (gigawatts) of natural gas-fired electricity generation capacity in 2017. Another 25.4 GW could be added in 2018. The additional power capacity in 2017 and 2018 would add 8% to capacity as of 2016. This could be a big boost for natural gas prices in the future.

However, Donald Trump’s energy policy could enhance the use of coal for power generation, impacting natural gas’s share in electricity generation.

Key moving averages

On February 1, 2017, natural gas futures were trading ~4.7% below their 100-day moving average and 3.5% below their 20-day moving average. On January 30, 2017, natural gas futures moved below their 100-day and 20-day moving averages.

Prices below the 100-day moving average and 20-day moving averages indicate bearish sentiment for natural gas prices. It could also mean more weakness ahead for natural gas prices.

Notably, natural gas price sentiment impacts ETFs like 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).

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