Natural Gas Prices Get Stuck in the Mud (UNG)

September 19, 2012 3:14 PM EDT
Not long ago, natural gas prices looked like the comeback story of year when, after reaching 10-year lows in April, prices recovered to $3.27 in late July. However, since then natural gas has shown very little life with prices stuck below $3 per million btu.

Part of the reason for the lack of momentum relates to the price of Central Appalachian coal, which recently traded at their lowest levels in more than two years, equivalent of just above $2 per million btu when compared to natural gas. The low prices stoke fears that utilities are back to burning coal instead of natural gas, considering the cheap prices.

One bright spot for natural gas has been weekly storage builds, which have been trending below norms for months. However, this could change if mild weather curbs demand for electricity. Tomorrow an EIA report on storage data for last week is expected to show a rise of 64 bcf, according to Reuters, slightly below the 5-year average of 73 bcf.

If forecasts are correct, traders aren't expecting a large rise in prices considering the record amount of natural gas already in storage and the higher than normal levels of production in the U.S.

Related ETF: United States Natural Gas (NYSE: UNG).

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