Natural gas exchange traded funds are on a three-day hot streak as traders anticipate that scorching weather will fuel electricity and air conditioning usage as Americans try to keep cool.
The United States Natural Gas Fund (UNG) is up 1.2% in afternoon trading Wednesday. The fund has gained 4.6% over the past week and is now testing its 200-day moving average.
The MDA Weather Services forecasts that most of the lower 48 states will experience higher-than-average temperatures from June 24 to July 3, reports Christine Buurma for Bloomberg.
“The forecasts are definitely looking hotter,” Victor Zevallos, an energy trader at FCStone Latin America LLC, said in the article. “We’re going to see some air conditioning demand kicking in and that’s sending prices higher.”
Around 32% of U.S. natural gas demand goes to power generation, according to the Energy Information Administration.
“Whether or not the potential cooling-related natural gas demand will be significant enough to have a strong impact on the weekly inventory injections is the big question,” Dominick Chirichella, senior partner at the Energy Management Institute, said in a note.
Natural gas prices have been depressed by elevated inventory levels for years, but storage levels are starting to decline. For the week ended June 7, inventories were 2.4% below the five-year average and 20% lower year-over-year. The EIA will provide its weekly report on natural gas storage Thursday.
Natural gas futures were 1.5% higher Wednesday, trading around $3.96 per million British thermal units. Gas prices have gained 19% so far this year.
United States Natural Gas Fund
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Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.