The Natural Gas Market Has Fallen for the Fourth Straight Month

December natural gas futures contracts trading in NYMEX fell by 1.8% to $2.26 per MMBtu (million British thermal units) on October 29, 2015. Prices fell due to oversupply concerns and the warm winter.

Gas-tracking ETFs such as the United States Natural Gas ETF (UNG) mirrored the price trajectory of natural gas prices in yesterday’s trades. UNG fell by 1.8% and settled at $9.5 on October 29.

On Thursday, October 29, 2015, the EIA (U.S. Energy Information Administration) released its Natural Gas Storage report. The government data showed that natural gas inventories rose by 63 Bcf (billion cubic feet) for the week ending October 23, 2015.

Industry surveys estimated that natural gas inventories could rise by 70 Bcf for the same period. The rising natural gas inventory will put downward pressure on natural gas prices.

Natural gas prices fell for the fourth consecutive month, the longest fall since September 2011. The fall in natural gas prices impacts US upstream producers such as Rice Energy (RICE), Rex Energy (REXX), Antero Resources (AR), and Devon Energy (DVN). These companies’ natural gas production mixes are more than 60% of their total production.

Energy ETFs such as the First Trust Energy AlphaDEX ETF (FXN) and the Guggenheim S&P Equal Weight Energy ETF (RYE) are also impacted by volatility in the energy market.

The latest forecasting models suggest mild winter across the lower 48 states of the United States. However, cold winter could be experienced in the Northern Plains and Midwest regions over the next five days. In contrast, East Coast regions of the United States could experience warm weather compared with last year. Mild weather will negatively influence natural gas prices.

Natural gas prices fell for the fifth time over the last ten days. Prices fell by 4.6% more on the average down-days than on the average up-days in the last ten trading sessions. Gas futures showed poor performance across all other commodities in yesterday’s trades. Prices fell more than 22% year-to-date due to oversupply concerns.

In this series, we’ll look at natural gas prices and fundamentals. For an in-depth fundamental 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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Browse this series on Market Realist:

• Part 2 - Weekly US Natural Gas Inventories Have Risen Since April 2015
• Part 3 - Will the Natural Gas Rig Count Rise for the Third Week in a Row?
• Part 4 - Will Natural Gas Prices Hold above $2 per MMBtu