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What Caused the Upside in Natural Gas Prices?

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Natural gas

On December 4, natural gas January futures rose 2.7% and settled at $4.457 per million British thermal units. On the same day, the S&P 500 Index (SPY), the Dow Jones Industrial Average Index (DIA), and the S&P 400 Mid-Cap Index (IVOO) fell 3.2%, 3.1%, and 3.6%, 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 caused the upside in natural gas prices?

In the trailing week, natural gas January futures rose 3.8%. According to Reuters, for the next two weeks, Refinitiv analysts have reduced the total degree days in the lower 48 US states to 412 as of December 4 from 415 on December 3. The reduction could result in lower natural gas use for heating than previously expected, which might limit natural gas’s rise. The total degree days are slightly higher than the 30-year average of 408 for these weeks. However, natural gas inventories are at a double-digit deficit to the five-year average in percentage terms, which might have helped natural gas rise. In Part 3, we’ll analyze the natural gas inventory levels.

Important price points

On December 4, the natural gas active futures were 6.4%, 24.3%, 38.5%, and 48.3% above their 20-day, 50-day, 100-day, and 200-day moving averages, respectively. Natural gas has a huge margin over most of these key moving averages, which indicates bullishness for the prices.

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