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US Natural Gas Futures Could Rise Next Week

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Natural gas futures 

August natural gas (UNG) (DGAZ) (UGAZ) futures contracts trading in NYMEX fell 0.67% to $2.96 per MMBtu (million British thermal units) on July 13, 2017. US natural gas prices fell for the second consecutive day due to profit-taking. Prices are near a four-month low despite the less-than-expected rise in natural gas inventories on June 30–July 7, 2017. However, prices have risen 4% in the last five trading sessions. Prices have fallen 17% year-to-date.

Lower natural gas prices have a negative impact on natural gas–weighted companies like Southwestern Energy (SWN), EQT (EQT), Range Resources (RRC), and Rice Energy (RICE).

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Natural gas price drivers next week 

US natural gas will be driven by the following fundamental factors next week:

  • An expectation of warmer-than-normal weather in the US next week would support natural gas prices.
  • An expectation of a less-than-expected addition in natural gas inventories this week would drive prices higher.
  • An expectation of a rise in US crude oil and natural gas rigs could weigh on natural gas prices. So far, US crude oil and natural gas rigs have risen more than 117% and 115% respectively, year-over-year.
  • The S&P 500 Index (SPY) (SPX-INDEX) is near a record. Bullish momentum in SPY could support oil and gas demand and the energy sector.
  • An expectation of improving natural gas demand would support prices.
  • A rise in US natural gas exports would also drive prices.

Natural gas highs and lows 

US natural gas prices hit $3.99 per MMBtu on December 28, 2016—the highest level in more than 24 months. In contrast, it hit $1.68 per MMBtu on March 4, 2016—the lowest level in the last 17 years.

August natural gas futures fell below their 20-day, 50-day, 100-day, and 200-day moving averages as of July 13, 2017. It suggests that natural gas prices could trade lower or be range bound next week.

In the next part of the series, we’ll analyze what to expect from US weather.

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