Why Natural Gas Prices Rose to a 2-Month High



Natural gas prices

US natural gas (DGAZ) (UNG) (FCG) futures contracts for May delivery rose 2.0% and settled at $3.33 per MMBtu (million British thermal units) on April 6, 2017. It’s the highest settlement since January 27, 2017. The S&P 500 (SPY) (SPX-INDEX) rose 0.20% on April 6, 2017. Crude oil and gas are major parts of the energy sector. The energy sector contributed ~6.6% of the S&P 500 as of April 7, 2017.

NYMEX (New York Mercantile Exchange) natural gas prices are at a two-month high due to the following factors:

  • flat natural gas production in recent months
  • improving natural gas demand
  • fall in natural gas inventories in 1Q17
  • short covering
  • cold weather

Prices have risen ~27.0% after hitting a three-month low in February 2017. Volatility in natural gas prices impacts natural gas–weighted upstream companies such as Cabot Oil & Gas (COG), Rice Energy (RICE), Exco Resources (XCO), and Antero Resources (AR).

Article continues below advertisement

US natural gas highs in the last 12 months

US natural gas (UGAZ) (BOIL) active futures hit $3.99 per MMBtu on December 28, 2016. It was the highest level in the last 25 months. Prices rose due to the following:

As of April 6, 2017, prices were 17.3% below their 12-month high. They fell due to warmer-than-normal weather for this time of year. For more on the effect of weather, read the next part of this series.

US natural gas lows in the last 12 months

US natural gas prices hit a 17-year low of $1.68 per MMBtu on March 4, 2016, due to mild weather, weak demand, strong supplies, and high inventories. We’ll be covering more bearish drivers in the rest of this series. As of April 6, 2017, prices have risen 96.4% in the last 12 months.

What’s in this series?

In this series, we’ll look at US weather, natural gas inventories, natural gas price forecasts, and US natural gas rig counts, production, and consumption.

We’ll start with US natural gas prices during the early morning hours of April 7, 2017.


More From Market Realist