Natural Gas Prices Rise Slightly on Cooler Weather Forecast
The latest forecasting models suggest that weather could be colder in the lower 48 states of the United States in the fourth week of December. In contrast, the weather is expected to be normal in the central parts of the United States. Weather in the United States is warmer this winter due to the El Niño weather pattern.
For the week ending December 11, 2015, the lower 48 states of the United States experienced warmer temperatures. The weather was seven degrees warmer than the 30-year average for winter weather. It was also three degrees warmer than the same period in 2014.
Heating degree days during the week ending December 11, 2015, were 23 fewer than last year’s level and 26 fewer than the five-year average. Fewer heating degree days means less demand for heating. The consensus of warm weather is leading to a slower depletion of natural gas inventories, negatively affecting natural gas prices.
Natural gas inventory
The EIA (U.S. Energy Information Administration) published its natural gas inventory report on December 17, 2015. The government agency reported that natural gas stocks fell by 34 Bcf (billion cubic feet) to 3,846 Bcf for the week ending December 11, 2015.
The current natural gas in storage is 16.4% more than the level of 3,304 Bcf in 2014. It’s also 9.1% more than the five-year average of 3,524 Bcf. The next EIA Natural Gas Storage Report is expected to release on December 24, 2015. The consensus of weak natural gas demand due to mild weather will continue to put pressure on natural gas prices for the week ahead.
Record natural gas production, the mild winter weather forecast, and record natural gas inventories are adding pressure to natural gas prices. Long-term lower natural gas prices affect US natural gas producers such as EXCO Resources (XCO), Chesapeake Energy (CHK), Newfield Exploration (NFX), and Devon Energy (DVN).
The uncertainty in the energy market also affects ETFs such as the Guggenheim S&P 500 Equal Weight Energy ETF (RYE), the PowerShares DB Energy ETF (DBE), and the PowerShares DWA Energy Momentum ETF (PXI).
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