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Will Weather Affect US Natural Gas Prices in May 2017?

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Natural gas prices 

June natural gas (UGAZ) (UNG) (FCG) futures contracts rose 0.8% and were trading at $3.21 per MMBtu (million British thermal units) in electronic trading at 5:00 AM EST on May 5, 2017. Prices are near a two-month high. Broader markets such as the S&P 500 (SPY) (SPX-INDEX) and the Dow Jones are trading near all-time highs. Bullish momentum in the US stock market could support natural gas demand and prices. For more on natural gas prices and drivers, read part one of this series.

Volatility in natural gas prices affects the earnings of natural gas producers like Rice Energy (RICE), EXCO Resources (XCO), and Antero Resources (AR).

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Weather outlook 

Commodity Weather Group and MDA Weather Services expect that the weather will be mild in May 2017. The western and southern parts of the US will experience warm weather for the next few days. Cold weather is expected in the eastern parts of the US for the next few days. Overall, the weather is expected to be mild in May 2017.

Changes in the weather impact the heating and cooling demand for natural gas (BOIL) (DGAZ) and influence prices. About 50.0% of US households use natural gas for heating and cooling purposes. Cold winters and warm summers drive the demand for natural gas. Demand tends to be lower during the spring season, which usually lasts until late June 2017. Changes in demand affect inventories.

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

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