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Will US Natural Gas Futures Outperform Wall Street Next Week?

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Natural gas futures  

December US natural gas (UNG) (UGAZ) futures contracts trading in NYMEX rose 0.97% and settled at $3.05 per MMBtu (million British thermal units) on November 16, 2017. The larger-than-expected fall in US natural gas inventories pushed natural (GASL) (FCG) gas prices higher. The EIA released the report yesterday. Meanwhile, natural gas prices are near a six-month high.

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US natural gas performance 

US natural gas active futures fell 4.5% in the last five trading sessions. They fell due to warmer-than-normal temperatures and oversupply concerns.

The largest natural gas tracking ETF is the VelocityShares 3x Long Natural Gas (UGAZ). It rose 8.8% in the last five trading sessions. However, the largest US natural gas producers like ExxonMobil (XOM) and EOG Resources fell ~3% in the past five trading sessions. Meanwhile, Chesapeake Energy (CHK) rose ~3% in the last five trading sessions.

Wall Street’s performance 

The NASDAQ (QQQ), Dow Jones Industrial Average Index (DIA), and the S&P 500 (SPY) rose on November 16, 2017. They rose due to stronger-than-expected 3Q17 earnings results and optimism about the US tax bill. These three indices hit an all-time high on November 8, 2017.

The S&P 500 rose 0.04% in the last five trading sessions. The energy sector (XLE) (VDE) fell 4.5% in the last five days. It dragged the SPY this week. However, the IT (XLK), healthcare (XLV), and materials (XLB) sectors might support SPY next week. So far, these sectors have been driving SPY in 2017.

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What could drive natural gas prices next week? 

A larger-than-expected withdrawal in natural gas inventories compared to the historical average could benefit natural gas prices. The expectation of cooler-than-average temperatures next week could also help US natural gas (BOIL) (FCG) prices. However, high US natural gas production could cap the upside for gas prices. US natural gas prices might outperform SPY next week due to the above factors.

What’s in this series?  

In this series, we’ll discuss US natural gas inventories, rig counts, gas supply and demand, and some natural gas price forecasts.

In the next part, we’ll discuss how the weather could impact natural gas prices.

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