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What’s Hindering Natural Gas’s Rise?

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Natural gas

On December 24, natural gas February futures fell 8.7% and settled at $3.42 per million British thermal units. Weather forecasts suggesting warmer weather might have spooked natural gas prices. On December 25, the markets were closed for Christmas.

In the trailing week, natural gas prices fell 0.9% due to the bearish weather forecast in the past. The weather forecast data might have hindered the rise in natural gas prices despite inventories being at a double-digit deficit to their five-year average in percentage terms, which we’ll discuss in Part 3 of this series.

In the last trading session, the S&P 500 Index (SPY), the S&P 400 Mid-Cap Index (IVOO), and the Dow Jones Industrial Average Index (DIA) fell 2.7%, 2.7%, and 2.9%, 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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Important price points

On December 24, the natural gas active futures were 0.5% and 10.2% above their 100-day and 200-day moving averages, respectively. On the same day, natural gas prices were 18.6% and 11.1% below their 20-day and 50-day moving averages, respectively. Natural gas prices below these short-term moving averages might indicate short-term weakness.

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