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Will US Natural Gas Futures and the S&P 500 Diverge?

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Natural gas futures

January natural gas (GASL) (UNG) futures contracts trading in NYMEX fell 1.1% to $2.68 per MMBtu (million British thermal units) on December 14, 2017. Active natural gas futures closed near the lowest level since February 24, 2017. The largest natural gas futures ETF, the VelocityShares 3x Long Natural Gas (UGAZ) fell 0.7% to 5.8 on December 14, 2017.

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US natural gas price drivers 

Natural gas prices (FCG) (GASL) fell due to forecasts of less heating demand. A smaller withdrawal in US natural gas inventories compared to historical averages also weighed on natural gas prices on December 14, 2017. The EIA released its weekly natural gas storage report on the same day.

Natural gas–weighed companies (XOP) (XLE) like Southwestern Energy (SWN) and Gulfport Energy (GPOR) fell on December 14, 2017. They fell 4.7% and 4.1%, respectively, on the same day.

US natural gas (DGAZ) futures have fallen ~12% in December 2017. They have also fallen 2.9% in the last five trading sessions. Prices fell due to forecasts of a warm winter, high production, and weak natural gas demand. The bearish momentum could push natural gas prices to trend lower next week. 

Wall Street’s performance

The NASDAQ (QQQ), Dow Jones Industrial Average (DIA), and S&P 500 fell 0.28%, 0.31%, and 0.41%, respectively, on December 14, 2017.

The materials (XLB) and healthcare (XLV) sectors dragged SPY on December 14, 2017. However, the S&P 500 (SPY) rose 0.57% in the last five sessions.

The telecommunication (IYZ), healthcare, and consumer discretionary (XLY) sectors supported SPY in the last five sessions. Sectors like IT (XLK) and healthcare will drive SPY higher next week. So far, these sectors have been driving SPY this year. 

In this series 

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

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