Yahoo Finance Natural Gas Prices Fell on Sluggish Demand but Cold Weather Ahead
Bottom Fishing Could Lead to a Natural Gas Price Rally
Natural gas prices fell
March natural gas futures contracts trading on NYMEX fell 2.9% and settled at $1.99 per MMBtu (million British thermal units) on Thursday, February 11. Prices fell due to a less-than-expected natural gas drawdown as a result of weak demand. Gas tracking ETFs like the United States Natural Gas ETF (UNG) also fell. UNG fell 2.7% and closed at $7.3 on February 11. The SPDR S&P 500 ETF (SPY) fell too.
Inventory update
On February 11, the EIA (U.S. Energy Information Administration) released its weekly natural gas inventory report. The government agency said US natural gas inventories fell 70 Bcf (billion cubic feet) for the week ended February 5. The much-less-than-expected drawdown in natural gas inventories weighed on natural gas prices in yesterday’s trading. Read the next part of this series for more detail on US natural gas inventories.
Weak demand due to mild weather forecasts in several areas of the United States also dragged US natural gas prices down. 50% of US households use natural gas prices for heating. Mild winter curbs heating demand and negatively affects natural gas prices in an oversupplied market. However, cold weather is expected in the Midwest and Mid-Atlantic over the next week. This forecast could marginally affect demand and gas prices.
Volatility analysis
US natural gas prices fell for three consecutive days. They’re trading close to 16-year lows. Gas prices fell 19% in 2015 due to long-term oversupply concerns. Record-low natural gas prices affect the profitability of natural gas producers like EXCO Resources (XCO), Rex Energy (REXX), QEP Resources (QEP), Anadarko Petroleum (APC), and Southwestern Energy (SWN).
The volatility in natural gas prices also affects ETFs and ETNs such as the PowerShares DB Energy ETF (DBE), the VelocityShares 3x Inverse Natural Gas ETN (DGAZ), the Fidelity MSCI Energy ETF (FENY), and the VelocityShares 3X Long Natural Gas ETN (UGAZ).
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