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What Might Spook Natural Gas in Early 2019?

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Dec. 4 2020, Updated 10:52 a.m. ET

Natural gas

On December 31, natural gas February futures fell 11% and settled at $2.94 per million British thermal units. On January 1, the markets were closed for New Year’s Day.

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What might spook natural gas in early 2019?

In the trailing week, natural gas prices fell 14.1% due to the warmer weather forecast. Also, production was near the record level. On December 31, natural gas production in the United States reached 87.2 Bcf (billion cubic feet) per day—1.8 Bcf per day below the record level on November 30 based on Reuters data. The rising rig count might spell trouble for natural gas prices, which we’ll discuss in the next part. The weather forecast data and the contraction in the negative inventories spread, which we’ll discuss in Part 3, might drag natural gas prices. These factors might spook natural gas in early 2019.

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) rose 0.8%, 1%, and 1.1%, 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.

Important price points

On December 31, the natural gas active futures were 26.7%, 24%, 14.3% and 5.7% below their 20- day, 50-day, 100-day and 200-day moving averages, respectively. Natural gas prices below the key moving averages might indicate weakness.

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