Why Natural Gas Prices Dropped Near $3

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The U.S. Energy Information Administration (EIA) reported Wednesday afternoon that U.S. natural gas stocks decreased by 49 billion cubic feet for the week ending December 19. That compared with a decrease of between 61 billion and 65 billion cubic feet anticipated by analysts.

Natural gas futures for February delivery traded down about 2.8% in advance of the EIA’s report, at around $3.12 per million BTUs, and slid to around $3.05 (down about 4.7% for the day) immediately following the report. Natural gas futures have slipped by more than $0.65 per million BTUs since last week.

Once again, moderate winter temperatures during the past week kept natural gas prices falling. A Christmas Eve storm is expected for the Midwest and East Coast, and a blast of cold Arctic air is going to move across the United States from the Northwest to the central states. The upper Midwest should see single-digit temperatures by the weekend, but the colder temps will have little impact on the more heavily populated states to the east until next week.

Stockpiles are about 4.8% above their levels of a year ago and about 4.9% below the five-year average. The mild weather has curtailed stockpile drawdowns.

The EIA reported that U.S. working stocks of natural gas totaled 3.25 trillion cubic feet, about 169 billion cubic feet below the five-year average of 3.42 trillion cubic feet and 150 billion cubic feet above last year’s total for the same period. Working gas in storage totaled 3.10 trillion cubic feet for the same period a year ago.

Here is how stocks of the largest U.S. natural gas producers reacting to this latest report:

Exxon Mobil Corp. (NYSE: XOM), the country’s largest producer of natural gas, was down about 0.9% to $93.73, in a 52-week range of $86.19 to $104.76.

Chesapeake Energy Corp. (NYSE: CHK) was down about 1.3%, at $20.01 in a 52-week range of $16.41 to $29.92.

EOG Resources Inc. (NYSE: EOG) was down about 3.5% to $93.08. The 52-week range is $80.63 to $118.89.

The United States Natural Gas ETF (NYSEMKT: UNG) was down about 4.9%, at $15.44 in a 52-week range of $15.43 to $27.89. The low was posted Wednesday.

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