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Will Cold Weather Forecasts Boost Natural Gas Prices?

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Natural gas prices and weather 

April natural gas (DGAZ) (UGAZ) (UNG) futures rose 1.1% and were trading at $3 per MMBtu (million British thermal units) in electronic trading at 3:45 AM EST as of March 10, 2017.

Natural gas prices hit a one-month high due to the bullish natural gas inventory report and cold weather forecasts. Broader markets like the S&P 500 (SPY) (SPX-INDEX), Dow Jones, and NASDAQ are trading near an all-time high. Bullish momentum in the US stock market could support natural gas demand and gas prices. For more on natural gas prices and drivers, read the previous part of this series.

Volatility in natural gas prices impacts natural gas producers’ earnings such as Antero Resources (AR), Cabot Oil & Gas (COG), Range Resources (RRC), and Memorial Resources (MRD). For more on natural gas prices, read Part 1 of this series.

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Weather outlook 

The latest weather reports suggest that cold weather will persist for a few days in the northern and eastern parts of the US. Snow and low temperatures across the Great Lakes region are expected next week. Some forecasting models suggest that mild weather will persist for the rest of the winter. The winter usually lasts until mid-March or April.

Changes in the weather impact the heating demand for natural gas (FCG) (GASL) and influence prices. About 50% of US households use natural gas for heating. Cold winters drive the demand for natural gas either for furnaces or natural gas–fired electricity generation to power heaters. Changes in demand impact inventories.

In the next part, we’ll take a closer look at US natural gas inventories.

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