13 Apr

Will Natural Gas’s Bull Market Come to a Halt?

WRITTEN BY Rabindra Samanta

Natural gas prices

In the last five trading sessions, natural gas (UNG) (BOIL) (FCG) May futures fell 2.4% and closed at ~$3.19 per MMBtu (million British thermal units). On April 12, 2017, prices moved 1.2% above prices in the previous session. Natural gas has traded between $3.13 and $3.34 per MMBtu in the past five trading sessions.

Will Natural Gas’s Bull Market Come to a Halt?

In the trailing week, the Energy Select Sector SPDR ETF (XLE) rose 0.8%, while the S&P 500 Index (SPY) (IVV) (VNN) (SPX-INDEX) fell 0.3%. Energy accounts for 6.6% of the S&P 500 Index. US crude oil (USO) prices rose 3.8% in the trailing week.

The S&P 400 Midcap 400 Index (IVOO) (MID-INDEX), which has 3.4% exposure to the energy sector, rose ~0.3% during this period. Energy accounts for 6.4% of the Dow Jones Industrial Average Index (DIA) (DJIA-INDEX). The Dow fell 0.3% between April 5 and April 12. The FTSE 100 Index (UKX-INDEX) (EWU) rose 0.2%, and the CAC 40 Index (PX1-INDEX) (EWQ) also rose 0.2% during this period. Oil and gas companies account for 14.1% of the FTSE 100 Index and 11.6% of the CAC 40 Index.

Despite the fall during the week, on April 12, natural gas active futures were 30.1% above their 2017 low of $2.56 per MMBtu on February 21, 2017. When securities rise more than 20%, they’re technically considered to have entered a bull market. However, mild weather and rising oil rigs could be a concern for natural gas prices. We’ll discuss these factors more in later parts of this series.

Key moving averages

On April 12, 2017, natural gas futures were trading ~0.3% below their 100-day moving average but 0.6% above their 20-day moving average. Prices are struggling near key moving averages. Fundamental factors will be key in deciding which way natural gas finally goes.

Series focus

In this series, we’ll analyze how fundamental drivers like the rig count, natural gas inventories, and the US dollar impact natural gas prices. We’ll also discuss what the natural gas futures forward curve might be indicating.

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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