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US Natural Gas Prices Could Underperform the S&P 500

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Natural gas prices 

US natural gas (DGAZ) (UNG) futures contracts for January delivery fell 5.4% to $2.76 per MMBtu (million British thermal units) on December 7, 2017. Active natural gas futures closed at the lowest level since October 27, 2017. It was also the biggest daily percentage decline since February 2017. The largest natural gas ETF, the VelocityShares 3x Long Natural Gas (UGAZ) fell 14.8% on December 7, 2017.

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US natural gas price drivers 

Prices fell due to forecasts of less heating demand for natural gas in December 2017. An unexpected increase in US natural gas inventories during the withdrawal season also pressured natural gas (FCG) (GASL) prices on December 7, 2017. The EIA released the data on the same day.

Similarly, energy producers (XLE) (VDE) like Cobalt International Energy (CIE), Southwestern Energy (SWN), and Range Resources (RRC) fell on December 7, 2017. They fell 17.3%, 5.2%, and 3.3%, respectively, on the same day.

US natural gas (BOIL) futures fell 8.6% in the last five trading sessions. Prices fell due to mild weather and weak natural gas demand. The momentum could push natural gas prices lower next week. 

Wall Street’s performance  

The NASDAQ (QQQ) rose 0.54% to 6,812.8 on December 7, 2017. The Dow Jones Industrial Average (DIA) and the S&P 500 (SPY) rose 0.29%, respectively, on December 7, 2017. The industrials (XLI) and materials (XLB) sectors supported SPY on December 7, 2017.

The S&P 500 (SPY) fell 0.4% in the last five sessions. The utilities (XLU) (VPU), healthcare (XLV), and real estate (VNQ) (IYR) sectors dragged SPY in the last five sessions. These sectors fell more than 1% during the previous five sessions. However, sectors like IT (XLK) (VGT) and financials (XLF) (VFH) will drive SPY higher next week. So far, these sectors have been driving SPY in 2017.

In this series 

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

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