US natural gas (DGAZ) prices were near a ten-month low due to excess supplies and mild weather. Lower gas (UNG) prices have a negative impact on energy producers’ (XLE) (PXI) profitability like WPX Energy (WPX), Range Resources (RRC), and EQT (EQT).
Natural gas futures contracts
The premium for January 2019 NYMEX natural gas futures over January 2018 natural gas futures was at $0.33 per MMBtu (million British thermal units) on December 21, 2017. The premium between these contracts was at $0.34 per MMBtu on December 7, 2017, which was the highest level since July 2010. A higher premium indicates that prices could fall.
Natural gas price drivers
A smaller withdrawal in US natural gas inventories compared to the seasonal averages could pressure natural gas prices next week. Mild weather could also pressure natural gas (UNG) prices. However, short covering and a cold winter forecast could support gas prices.
The EIA estimates that US natural gas prices could average $3.12 per MMBtu in 2018. The expectation of a rise in US natural gas consumption and exports could support natural gas prices. Even the World Bank expects that US natural gas prices will average $3.1 per MMBtu in 2018.
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