US Natural Gas Inventories Pulled Prices Lower
(Continued from Prior Part)
US natural gas prices
US natural gas prices fell by ~1.9% between Friday, October 9, and Thursday, October 15, 2015. Prices closed at $2.50 per MMBtu on October 9 and $2.45 per MMBtu (British thermal units in millions) on October 15.
Lower natural gas prices are negative for natural gas producers such as Chesapeake Energy (CHK), Range Resources (RRC), QEP Resources (QEP), and Cabot Oil & Gas (COG), because these companies make less money when natural gas prices fall. These companies combined make up ~2% of the Vanguard Energy ETF (VDE).
With lower prices, natural gas producers may be inclined to produce less. This inclination, in turn, would be negative for the energy transportation MLP sector, which includes companies such as MarkWest Energy Partners (MWE), because lower production would mean lower volumes to transport, leading to lower MLP revenues.
Natural gas weekly price recap
Natural gas prices on Monday, October 12, 2015, rose 1.3% compared to Friday, October 9. Prices settled at $2.54 per MMBtu. Prices rose on colder weather forecasts, which raised expectations of an increase in heating demand.
On Tuesday, prices fell by 1.4% as forecasts largely pointed to better-than-normal weather in the following two weeks. Prices settled at $2.49 per MMBtu.
On Wednesday, prices rose again, by 0.8% to settle at $2.51 per MMBtu. Prices rose on cooler weather forecasts.
On Thursday, prices fell after the EIA (U.S. Energy Information Administration) reported that storage inventory numbers had increased more than market expectations. Prices fell by ~2.6% and settled at $2.45 per MMBtu.
On early Friday, October 16, prices fell even more to ~$2.44 per MMBtu.
Read on to the next part of this series, where we’ll look at how various securities exposed to natural gas performed last week.
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