Natural Gas Prices
Natural gas (FCG) (BOIL) (UNG) (GASL) futures for February delivery was trading close to 2016 highs as of December 30, 2016. Prices rose due to cold weather forecasts and a bearish US natural gas inventory report.
Higher natural gas prices usually have a positive impact on natural gas producers’ earnings such as Range Resources (RRC), Rex Energy (REXX), EXCO Resources (XCO), Cabot Oil & Gas (COG), and Gulfport Energy (GPOR).
The United States Natural Gas ETF (UNG) follows US natural gas futures. It fell 1.7% to $9.34 on December 30, 2016.
The latest weather models suggest mild weather for the first week of January 2017. However, colder-than-normal weather is expected for the rest of January 2017 in several parts of the US. Commodity Weather Group reported that record cold weather is expected this winter in the US—similar to 2013–2014. An arctic blast is expected to hit the northwest and northern plains in the US in the next week. It will push the temperatures lower. Colder weather will drive the heating demand in January and support natural gas (DGAZ) (UGAZ) (UNG) (GASL) prices.
About 50.0% of US households use natural gas for heating. Cold winters drive the demand for natural gas either for furnaces or natural gas–fired electricity generation to power heaters. The rise in demand impacts inventories. Cold weather led to a record withdrawal of natural gas from inventories. We’ll take a close look at US natural gas inventories in Part 3 and Part 4 of this series.
By Gordon Kristopher Jan 3, 2017 9:11 am EST