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January Natural Gas Futures Fell after the EIA’s Report

Gordon Kristopher

Mild Weather and Record Production Impact the Natural Gas Market

Natural gas prices fell

January natural gas futures contracts fell by 1.3%. They were trading at $2.26 per MMBtu (British thermal units in millions) on November 26, 2015, in the electronic trading session. Natural gas futures contracts for December delivery rose by 0.3% and expired at $2.21 per MMBtu on November 25, 2015. The prices fell due to the rising natural gas inventory during trading on Thursday.

The latest forecasting model suggested that the weather could be milder in the lower 48 states of the US. A mild winter will curb the heating demand. In the US, the natural gas demand peaks during the period from November to March. The mild winter already led to collateral damage in natural gas prices. Prices hit four-year lows of $2.00 per MMBtu at the end of October. As a result, weak demand caused a rise in the natural gas inventory.

On November 25, 2015, the EIA (U.S. Energy Information Administration) released its weekly natural gas stockpile report. The data highlighted that natural gas stocks rose by 9 Bcf (billion cubic feet) to a record of 4.0 Tcf (trillion cubic feet) for the week ending November 20, 2015. Market surveys estimated that the natural gas stocks could rise by 7 Bcf. It’s the highest natural gas inventory storage recorded. Natural gas stocks rose for the 34th straight week. The rising natural stocks are putting pressure on natural gas prices.

The fall in the natural gas prices impacts US natural gas producers like Rice Energy (RICE), Devon Energy (DVN), Newfield Exploration (NFX), and Range Resources (RRC). The uncertainty in the oil and gas prices also impacts ETFs like the PowerShares DB Energy ETF (DBE) and the PowerShares DWA Energy Momentum ETF (PXI).

In this series, we’ll look at natural gas prices and fundamentals. For an in-depth look at oil and gas as well as related companies, sectors, and drivers, please visit Market Realist’s Energy and Power page.

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