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Why Natural Gas Traders Track US Weather

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Jun. 30 2017, Published 7:15 a.m. ET

Natural gas prices 

US natural gas (BOIL) (FCG) futures contracts for August delivery fell 0.6% and were trading at $3.02 per MMBtu (million British thermal units) in electronic trading at 3:20 AM EST on June 30, 2017. Prices fell due to profit-booking. However, prices are near a four-week high. The United States Natural Gas ETF (UNG) is also near a four-week high. It fell 1% to 6.82 on June 29, 2017.

The rollercoaster ride in natural gas prices impacts natural gas producers like Southwestern Energy (SWN), EQT (EQT), Gulfport Energy (GPOR), and Range Resources (RRC).

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Weather forecasts  

US natural gas futures hit a four-week high on June 28, 2017, due to the expectation of a warm summer, which could result in higher demand for natural gas. Meanwhile, the latest forecasting models suggest that cool weather and showers are expected in the northern part of the US next week. The western and southern parts of the US could experience mild weather next week. Overall, the weather is expected to be mild for the next 15 days.

However, some traders speculate that a warmer-than-normal summer could drive natural gas demand in the coming months. It would support natural gas prices. More than 50% of the US households use natural gas for heating and cooling purposes.

Changes in the weather drive demand and influence US natural gas inventories. Changes in inventories impact natural gas (DGAZ) (UGAZ) prices. Natural gas demand is expected to be higher during the summer season.

In the next part, we’ll analyze US natural gas inventories for the week ending June 23, 2017.

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