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Are the Bears in Control of US Natural Gas Futures?

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Natural gas futures 

November natural gas (UGAZ) (GASL) futures contracts trading in NYMEX rose 0.7% and closed at $2.87 per MMBtu (million British thermal units) on October 19, 2017. Prices rose due to the less-than-expected rise in US natural gas inventories. The U.S. Energy Information Administration published the report on October 19, 2017.

However, prices (GASL) (BOIL) are near two-week lows because the weather is expected to be mild. The weather is mild during this period of the year. The natural gas demand is also at a seasonal low during October.

Changes in natural gas (UNG) (DGAZ) prices impact natural gas producers (VDE) (OIH) like WPX Energy (WPX), Range Resources (RRC), and EQT (EQT).

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Highs and lows  

US natural gas active futures tested $1.68 per MMBtu on March 4, 2016—the lowest level in the last 17 years. On the other hand, gas prices tested $3.99 per MMBtu on December 28, 2016—the highest level in almost three years.

Natural gas price drivers next week  

The weather in the US will likely be mild for the next two weeks. The southern and northern parts of the US might experience warmer-than-average temperatures. Mild temperatures could lead to a fall in natural gas demand and pressure US natural gas (BOIL) (FCG) prices.

The market expects that US natural gas inventories could rise above the seasonal average, which could weigh on natural gas prices. High US natural gas production could also weigh on natural gas prices. Prices have fallen ~20% year-to-date due to the rise in US natural gas production and mild weather.

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Wall Street  

The Dow Jones Industrial Average Index (DIA) and the S&P 500 (SPY) settled at record levels on October 19, 2017. The expectation of high 3Q17 earnings results pushed Wall Street higher.

The utilities (XLU) (VPU), healthcare (XLV), and telecommunication (VOX) (IYZ) sectors supported the S&P 500 on October 19, 2017.

Series overview  

In this series, we’ll discuss US natural gas inventories, rig counts, natural gas production, and natural gas consumption.

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