• Tony Zelinski

US Natural Gas Prices Were Mixed in 2016: What’s Next?


Natural gas prices in 2016

US natural gas prices were on a rollercoaster ride in 2016. February 2017 natural gas (FCG) (BOIL) (UGAZ) (GASL) futures contracts fell 2.1% and closed at $3.72 per MMBtu (million British thermal units) on December 30, 2016. However, it rose 59% in 2016 compared to 2015. It’s the largest annual gain for natural gas since 2005. Natural gas was the second best performer across commodities in 2016. Zinc was the top performer—it rose ~60% in 2016—compared to the previous year.

US natural gas highs in 2016

US natural gas active futures hit $3.99 per MMBtu on December 28, 2016. It was the highest level since December 2014. Prices rose due to the following:

  • cold weather forecasts

  • fall in US natural gas inventories

  • slowing natural gas production

As of December 30, 2016, prices were 6.8% below their 2016 highs. In the last six months, they rose ~40.0% due to the hot summer, short covering, and traders watching for possible impacts from La Niña.

US natural gas lows in 2016

Natural gas (DGAZ) (UGAZ) (GASL) prices hit a 17-year low of $1.64 on March 3, 2016, due to mild weather, weak demand, strong supplies, and high inventories.

As of December 30, 2016, prices rose 127.0% from their lows in 2016. Higher natural gas prices usually have a positive impact on natural gas producers’ earnings such as Cabot Oil & Gas (COG), Southwestern Energy (SWN), Newfield Exploration (NFX), and Gulfport Energy (GPOR).

Moves in crude oil and natural gas prices can also impact funds such as the United States Natural Gas ETF (UNG), the VelocityShares 3x Inverse Natural Gas ETN (DGAZ), and the First Trust ISE-Revere Natural Gas ETF (FCG).

Photo and recommended reading source: Market Realist

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