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Natural Gas Is near a Nine-Month High: What’s Next?

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Nov. 20 2020, Updated 4:42 p.m. ET

Natural gas 

On November 6, natural gas December futures fell 0.3% from a nine-month high and settled at $3.56 per MMBtu (million British thermal units).

On November 6, the S&P 500 Index (SPY), the S&P 400 Mid-Cap Index (IVOO), and the Dow Jones Industrial Average Index (DIA) rose 0.6%, 0.6%, and 0.7%, respectively. The oil and gas constituents of these equity indexes could be impacted by movements in energy commodities.

Natural gas prices could be important for integrated energy stocks like ExxonMobil (XOM) and Chevron (CVX). Their upstream businesses operate with a production mix of ~39% in natural gas.

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What’s next?

In the trailing week, natural gas December futures rose 11.5%. According to Reuters, for the next two weeks, Refinitiv analysts have increased the total degree days to 339 on November 6 from 334 on November 5 in the Lower 48 US states. The increase might result in higher natural gas use for heating than previously expected. The total degree days are also higher than the 30-year average of 267 for these weeks.

The inventories are maintaining a double-digit deficit figure compared to the five-year average, which could support natural gas’s rise. In Part 3 of this series, we’ll discuss the natural gas inventory levels. However, the higher oil rig count could cap natural gas’s rise, which we’ll discuss in the next part.

Important price points

On November 6, the natural gas active futures were 9.7%, 15.9%, 19.8%, and 23.3% above their 20-day, 50-day, 100-day, and 200-day moving averages, respectively. Natural gas above these key moving average indicates bullishness for the prices.

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