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Natural Gas: Dullest May Month since 2014

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May. 22 2019, Published 8:02 a.m. ET

Natural gas and energy stocks diverged

On May 21, natural gas June futures fell 2.2% and settled at $2.61 per MMBtu (million British thermal units)—4.9% above the lowest closing level for active natural gas futures since June 6, 2016. On May 21, Antero Resources (AR) and Gulfport Energy (GPOR) both rose 1.5%. They were the underperformers among natural gas–weighted stocks. Other natural gas–weighted stocks defied the downturn in natural gas and closed in the green. A rise of 0.8% in the S&P 500 Index (SPY) might explain this divergence.

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May is turning out to be dull

So far in May, natural gas prices have risen 0.4%—the lowest gain for natural gas futures for any May month since 2014. The rise in natural gas supplies and weaker demand data could be behind the dullness in natural gas prices. US crude oil prices near their six-month high might be another factor that has influenced energy traders to focus more on oil than natural gas futures. On May 21, natural gas’s implied volatility was 19.3% below its 2019 average level.

On May 21, the natural gas active futures were 1.2% above their 20-day moving average. On the same day, natural gas prices were 1.7%, 6.5%, and 15.8% below their 50-day, 100-day, and 200-day moving averages, respectively. If natural gas prices fall below their 20-day moving average on May 23 due to a possible bearish EIA inventory report, we could see more weakness in natural gas prices.

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