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Natural Gas Futures: Outlook for May 14–18

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Nov. 20 2020, Updated 1:28 p.m. ET

Key natural gas price drivers  

US natural gas futures increased 3.2% on May 3–10. Natural gas prices increased due to a lower increase in natural gas inventories. The United States Natural Gas ETF (UNG) and the First Trust Natural Gas ETF (FCG) increased ~3% and ~6%, respectively, on May 3–10. UNG seeks to track active natural gas futures. FCG seeks to track the performance of the index of companies involved in natural gas exploration and production.

Anadarko Petroleum (APC), Devon Energy (DVN), and Continental Resources (CLR) rose 4%, 10%, and 6.7%, respectively, on May 3–10. These stocks account for 16% of FCG’s holdings.

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Mild weather is expected for the next two weeks, which could keep demand low. Mild weather could pressure natural gas prices. A rise in natural gas production could also pressure natural gas prices. US natural gas inventories are at a lower level compared to the seasonal averages for this period of the year, which is bullish for natural gas prices. A rise in exports could also benefit natural gas prices.

From a charting perspective, June US natural gas futures contracts were trading above their 20-day, 50-day, and 100-day moving averages on May 10. The prices could have some support against downside in the short term. 

Forecasts  

US natural gas prices averaged $2.99 per MMBtu (million British thermal units) in 2017. The EIA released its Short-Term Energy Outlook report on May 8. The EIA estimates that US natural gas prices could average $3.01 per MMBtu in 2018—0.6% higher than the April estimates. Record natural gas production could limit the upside for natural gas prices.

The EIA also estimates that US natural gas prices could average $3.11 per MMBtu in 2019—1.4% higher than the April estimates. The expectation of a rise in natural gas demand and exports could support natural gas prices.

Read President Trump, Iran, and US Supplies Drive Crude Oil Prices for the latest updates on crude oil.

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