6/27 SEI Advisor, Nextility, Shares Pricing Updates in the Natural Gas Market
Are the bulls ready to stampede? If you haven’t been watching closely, you may not have noticed that natural gas prices have shot up significantly over the past 3 months. On 6/20/16, natural gas closed at $2.75, +$0.47 or +20.6% since the end of May and up an astonishing +70.8% since hitting historic lows in March. Ouch!
We monitor closely the price of natural gas because not only is it a primary heating fuel for many homes and businesses it is now the number one fuel in the US for generating electricity. So natural gas prices often set the trend for electricity prices.
There are a number of factors driving the rise in natural gas prices including summer seasonality and the end of this year’s El Nino. But the most direct impact has been driven by lower than expected natural gas injections into storage. Although natural gas storage is at record levels for this date (3041 BCF / 70% full), injections have fallen short of the five-year average the past five weeks in a row. It appears that this drop off in injections is largely caused by slowing natural gas production resulting from recent low prices.
TLDR: No one knows for sure where natural gas prices are going but it does seem that the Bulls are on the run and we are likely to see increased natural gas prices going forward. Remember, we are coming off pricing that was the lowest in 17 years so it’s not surprising prices are trending up. We are likely to see a trading range of between $2.25 and $3.25 for the rest of the year. It is very unlikely that we will get back to the historically low prices of earlier this Spring.
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