US Natural Gas Prices Ignore Bullish Inventory and Hit 3-Year Lows
(Continued from Prior Part)
US natural gas prices
US natural gas prices fell by ~1.8% between Friday, October 16, and Thursday, October 22, 2015. Prices closed at ~$2.39 per MMBtu on October 22 and $2.43 per MMBtu (British thermal units in millions) on October 16.
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 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 19, 2015, rose ~0.5% compared to Friday, October 16. Prices settled at $2.44 per MMBtu. Prices rose on colder weather forecasts, which raised expectations of an increase in heating demand.
On Tuesday, prices rose further by ~1.4% as forecasts pointed to below-normal temperatures in the Northeast region through October 29. Prices settled at $2.48 per MMBtu.
On Wednesday, prices took a deep plunge as weather forecasts largely predicted above-normal temperatures while inventories continued to outpace the five-year average since May 2015. Prices fell by ~2.9%, canceling previous gains to settle at $2.41 per MMBtu.
On Thursday, prices fell further and touched their lowest in three years. Milder weather forecasts outweighed the EIA (U.S. Energy Information Administration) report, which showed that storage inventory numbers had increased less than market expectations. Prices fell by ~0.75% and settled at $2.39 per MMBtu.
On early Friday, October 16, prices fell even more to ~$2.35 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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