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US Natural Gas Futures Feel the Heat Due to the Weather

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Natural gas prices  

US natural gas (UGAZ) (DGAZ) futures contracts for January delivery rose 0.79% to $3.05 per MMBtu (million British thermal units) at 1:20 AM EST on December 1, 2017. Prices are near a three-week high. However, they fell 9.3% in the last three months. Lower gas prices have a negative impact on energy companies’ (XLE) (XOP) profitability like ExxonMobil (XOM), Gulfport Energy (GPOR), Newfield Exploration (NFX), and EQT (EQT).

The E-Mini S&P 500 (SPY) futures contracts for December delivery fell 0.29% to 2,640.25 at 1:20 AM EST on December 1, 2017.

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Weather forecasts  

The latest forecasting models suggest that the weather is expected to be mild in the northern parts of the US for the next ten days. However, the Great Lakes and northwestern parts might experience rain and snow showers for the next few days. The central and southern regions in the US might experience warmer-than-normal temperatures. However, there could be cooler-than-normal temperatures by the end of next week.

Overall, the weather in the US is expected to be moderate on November 30–December 8, 2017. Nearly 50% of US domestic households use natural gas for heating and cooling. Mild temperatures could lead to less heating demand for natural gas, which is bearish for natural gas (UNG) (BOIL) prices. Lower gas prices are bearish for energy companies like Newfield Exploration and Gulfport Energy.

NOAA estimates that the temperatures this winter will be 13% colder than last winter across the US. 

Next, we’ll cover US natural gas inventories.

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