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Natural Gas’s Multiyear Rise Might Not Be Stoppable


Nov. 20 2020, Updated 3:39 p.m. ET

Natural gas

On November 13, natural gas December futures rose 8.3% and settled at $4.10 per MMBtu (million British thermal units)—the highest closing level for natural gas active futures since November 26, 2014.

On November 13, the S&P 500 Index (SPY) and the Dow Jones Industrial Average Index (DIA) fell 0.1% and 0.4%, respectively, while the S&P 400 Mid-Cap Index (IVOO) didn’t change. 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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Natural gas’s rise might not be stoppable

In the trailing week, natural gas December futures rose 15.4%. According to Reuters, for the next two weeks, Refinitiv analysts have increased the total degree days to 380 on November 13 from 371 on November 12 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 302 for these weeks.

The inventories are maintaining a double-digit deficit figure in percentage terms 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 13, the natural gas active futures were 22.8%, 30.6%, 36.6%, and 42.1% above their 20-day, 50-day, 100-day, and 200-day moving averages, respectively. Natural gas has a huge margin above these key moving averages, which indicates bullishness for the prices.


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