Natural Gas Hit as Inventory Decline Comes in Light (UNG)

November 15, 2012 10:58 AM EST
Nat-gas futures and United States Natural Gas ETF (NYSE: UNG) declined in early trading on Thursday after today's weekly inventory report by the EIA showed stockpiles declined by 18 bcf. Analysts were calling for a decline of 22 bcf. The widely anticipated decline is the first drop in inventory for the winter season, and considering record high storage, inventory reports are critical data points for traders.

Overall, natural gas prices are being pushed around by volatility in supply demand dynamics. As prices rise, production goes up and demand goes down. As prices fall, production falls and demand rises. While this may seem like a simplistic assessment, when temperature, total inventory, rig count, production, coal prices, nuclear outages, and other factors get thrown into the mix, it gets a bit more complicated, though the overall thesis is one of basic supply and demand.

After dropping 1 percent following today's inventory print, UNG has recovered slightly. Natural gas futures trade near $3.70 per million BTU.

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