Will Natural Gas Keep Recovering?

The price of natural gas changed direction and added over 4.3% during the past week. The Henry Hub ended close to $4 – the highest level in the past three weeks. United States Natural Gas (UNG) also recovered in the past few days. Moreover, other natural gas related stocks such as Chesapeake Energy (CHK) also rose by 2% during last week. This rally comes after the recent strong buildup was higher than normal but slightly below expectations. Will natural gas continue to rise?

Injections to storage – do they matter?

Before we dive into the recent developments in the natural gas market, does the change in natural gas storage impact the price of natural gas? Let’s consider the changes in the price of natural gas on Thursday, when the EIA releases its weekly update on storage, production and consumption.

This means, as the injection to storage picks up above last year’s levels, the price tends to rise on Thursday. This result, however, isn’t very impressive, because this storage shift can only explain 5.3% of the volatility of natural gas prices (even though it is a significant correlation). But hold on it gets worse: This regression is a bit misleading, since it takes into account both the injection season (summer) and extraction season (winter).

The rest of this analysis is at Seeking Alpha

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