Natural Gas Market: Record Inventories Mark the Turning Point (Part 1 of 3)
Natural gas price declines
Below is our natural gas price fundamental analysis. For an in-depth look at natural gas and related companies, sectors, and drivers, please refer to our Energy and Power page.
NYMEX May natural gas futures slumped by 2.88% and closed at $2.60 per MMBtu (British thermal units in millions) on Thursday, April 23, 2015. Prices decreased as the natural gas in storage increased to record levels. The ETFs that follow natural gas like the United States Natural Gas Fund LP ETF (UNG) also fell by 2.22% and closed at $12.93 on Thursday.
Yesterday, the EIA (U.S. Energy Information Administration) reported that natural gas in storage increased by 90 Bcf (billion cubic feet) against the market estimates of 87 Bcf. As a result, natural gas prices slipped during trade on Thursday, April 23, 2015. Last week, the weekly gas inventory increased by 63 Bcf. The increasing inventory implies weak demand in the oversupplied market. The next report is expected to be released on April 30, 2015.
This is the fifth down day over the last ten days. Prices increased by 0.07% more on the average up days than on the average down days over the last ten trading sessions. May natural gas futures performed the worst in the yesterday’s trade. Gasoline continued to top the charts for the second day across all of the commodities. Gas prices continued the long-term downtrend and fell 11.84% YTD (year-to-date)—led by oversupply and sluggish demand.
Oil and gas ETFs like the Energy Select Sector SPDR ETF (XLE) and the Spider Oil and Gas ETF (XOP) gained marginally despite natural gas prices dropping in yesterday’s trade. They increased marginally by 0.68% and 0.02% at the end of trade on Thursday. Oil producers like Sandbridge Energy (SD), Stone Energy (SN), and Magnum Hunter (MHR) dragged XOP down. These stocks have a natural gas production mix that’s more than 50% of their total production. They account for 3.21% of XOP.
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