Cold Weather Keeps UNG Up – But for How Long?

The price of United States Natural Gas (UNG) continued its rally as it added 5.5% during last week. Since the beginning of the month, UNG rose by almost 11%. The recent changes in the weather have contributed to the rise in UNG. But will UNG keep its recovery?

Last week marked the first extraction from storage this season. The harsh cold in the East, mainly in the Northeast contributed to the sharp rise in demand for natural gas.  Last week’s consumption grew by 36%: the demand for the commodity in the residential/commercial sectors spiked by 68%, week over week and by 62% compared to the same week last year. Moreover, last week’s heating degrees days were higher than normal, which was another indication for higher demand for natural gas for heating purposes.

The latest extraction was 17 Bcf; it was still 7 Bcf below the 5 year average injection but 28 Bcf below last year’s. Based on the recent EIA weekly report, the underground natural gas storage declined to 3,594 Bcf, which is 6.4% below the 5-year average.

Over the coming weeks, however, the weather forecasts are for above normal temperatures throughout the East, but colder including parts in the Midwest and Northeast.

The rest of this analysis is at Seeking Alpha

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