Natural Gas Prices Fall Due to Excess Supply Estimates
Rising Production and Stockpile Impact Natural Gas Prices
Natural gas prices fall
This series analyzes natural gas prices and fundamentals. For an in-depth fundamental look at oil and gas and related companies, sectors, and drivers, please refer to our Energy and Power page.
September natural gas futures contracts trading in NYMEX fell by 1.88% and closed at $2.72 per MMBtu (British thermal units in millions) on July 31, 2015. Prices fell for the second day due to ample supply concerns. Gas tracking ETFs like the United States Natural Gas Fund LP ETF (UNG) also fell in the direction of natural gas prices. UNG fell by 2.18% and closed at $13.04 on July 31, 2015.
The EIA (U.S. Energy Information Administration) reported that natural gas production might rise for the tenth consecutive year. New wells coming online from the shale deposit might support natural gas production. The output will likely rise by 5.70% to 78.9 Bcf (billion cubic feet) in 2015 from the levels in 2014.
Last week, the EIA published that the natural gas stockpile rose by 52 Bcf (billion cubic feet) for the week ending July 24, 2015. The rise in production and ample supplies might continue to negatively impact natural gas prices.
Mild weather is estimated in the northeast and Midwest parts of the US in the next week, according to MDA Weather Services. In contrast, warmer weather is expected in the southern and western parts of the US. This could benefit natural gas prices.
This is the fifth down day for natural gas prices in the last ten trading sessions. Over the same period, prices fell by 1.53% more on the down days than on the up days. September natural gas futures were among the poor performers in Friday’s trade. Gas prices fell more than 5% YTD (year-to-date)—led by ample supply concerns.
US oil and gas producers like Cabot Oil & Gas (COG), Rice Energy (RICE), and Southwestern Energy (SWN) are affected by lower natural gas prices. Combined, they account for 2.78% of the SPDR Oil and Gas ETF (XOP). These companies’ natural gas production mix is more than 35% of their total production.
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