Will Natural Gas’s Rally Slowdown?

The price of natural gas has rallied to its highest level since July 2011. United States Natural Gas (UNG) has also increased in the past several weeks. Based on the latest U.S Energy Information Administration report, last week’s withdrawal from natural gas storage was close to the five year average withdrawal. Will natural gas’s recent rally slowdown? Let’s examine the latest developments in the natural gas market.

During the month (up-to-date), the price of Henry Hub (short term delivery) jumped by 10.04%. Furthermore, United States Natural Gas also rallied by 11.8%. As of last week, the Henry Hub price was $0.64 per million BTUs higher than the price during the same week in 2012. The recent recovery of natural gas may have contributed to the rally of shares of gas and oil producers such as Chesapeake Energy (CHK): During last week, Chesapeake‘s stock increased by 1.8%. If natural gas continues rally, this could augment the expected revenues of Chesapeake and may slightly positively affect the company’s value.

The chart below presents the developments to the price of natural gas and UNG in the past twelve months. Prices are normalized to December 14th, 2012.


According to the recent EIA weekly report, the underground natural gas storage  dropped by 81 Bcf and reached 3,533 Bcf. In comparison, in 2012 the storage rose by 2 Bcf; the five years average extraction was 79 Bcf.

The rest of this analysis is at Seeking Alpha

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