Energy is volatile, while gold signals strength (Part 1 of 6)
Natural gas prices rallied
In this series, we’ll analyze natural gas, crude oil, and gold prices. For an in-depth fundamental look at natural gas and related companies, sectors, and drivers, please refer to our Energy and Power page.
Natural gas prices for the April futures contract closed at $2.734 per MMBtu (British thermal units in millions) on Friday. This tested the highs on February 3, 4, and 10. This is the sixth up day in the last ten trading sessions. The average up days have been 0.95% less than the down days over the same period.
April gas futures closed near the day’s high
The April futures contracts for natural gas closed near the day’s high—up by 0.99% on February 27, 2015. For the day, the traded volume decreased by 54,019 contracts from the previous day. The total volume for the day was 107,303 contracts. Natural gas prices are trading almost 39% lower than the peak on November 2014—led by a massive surplus of natural gas.
The natural gas prices have been experiencing extreme volatility since the beginning of February 2015—led by the clash of bulls and bears. Bears drive down the prices by a massive natural gas supply consensus. In contrast, bulls support the rise in natural gas prices on the expectation of extended cold weather and lower natural gas withdrawals.
Last week, on February 26, 2015, the EIA (U.S. Energy Information Administration) reported that natural gas in storage declined by 219 billion cubic feet, or Bcf. This was less than the consensus of 241 Bcf. As a result, prices dropped. However, the decline was short-lived. Prices resumed their rally the next day on February 27, 2015. The rally was led by the forecast for an extended cold weather climate across major parts of the US.
The next US storage report will be released on March 5, 2015.
The rise in natural gas prices positively impacts natural gas ETFs’ margins—like the United States Natural Gas Fund (UNG) and the VelocityShares 3X Long Natural Gas ETN (UGAZ). It also affects natural gas producers’ margins—like EOG Resources (EOG), Southwestern Energy Company (SWN), and Anadarko Petroleum (APC).
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