Natural Gas Market Is Volatile Due to Weather and Inventory Data
Commodity Weather Services reported that the weather would be mild in the eastern parts of the US during the first half of December 2015. In the coming weeks, the weather is also expected to be warmer in the lower 48 states of the US due to the El Nino weather pattern. It’s important to note that 49% of the US households use natural gas for heating purposes. Mild winter weather means less use of natural gas for heating purposes. As a result, it would negatively impact the demand for natural gas.
Weather last week
The EIA (U.S. Energy Information Administration) released its weekly natural gas update on December 2, 2015. It highlighted that the weather in the lower 48 states in the US averaged 44 degrees in the week ending November 27, 2015. The temperatures were one degree warmer than the 30-year normal temperature during this period of the year. The heating degree days are eight less than during the same period in 2014. The fall in the heating degree days suggests that the winter will be mild. Also, the need for heating will be less compared to last year. The residential and commercial demand for natural gas rose during the week ending November 27—compared to the previous week.
The demand from the residential and commercial segments could increase in the following weeks since there isn’t a holiday. The rise in demand for natural gas will benefit natural gas producers like EQT (EQT), ConocoPhillips (COP), Cimarex Energy (XEC), Newfield Exploration (NFX), and EXCO Resources (XCO). The roller coaster ride in the energy market will impact ETFs like the PowerShares DB Energy ETF (DBE) and the iShares US Oil Equipment & Services ETF (IEZ).
In the next part of this series, we’ll discuss how inventory data influence the natural gas market.
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