Natural Gas Losing Steam

This winter, natural gas prices hit a five-year high at $6.49 per million British thermal units, charging higher due to extreme cold weather across much of the country. This year's long and harsh winter increased natural gas heating demand, which drew gas inventories to the lowest level in over a decade.

Since April, production has been outpacing demand, which is helping to rebuild supplies. In the most recent weekly update from the Energy Information Administration, national inventories climbed by 74 billion cubic feet, more than had been anticipated by most analysts. The steadily climbing supply helped to knock natural gas prices sharply lower, dropping them to $4.56 on Thursday, the lowest price in three weeks. Despite the recent supply build, US natural gas inventories are still only at half of their typical level for this time of year.

However, producers may be able to make up this shortfall, as US natural gas production is still increasing due to the expansion of hydraulic fracturing, commonly known as fracking. This process, though controversial due to environmental concerns, has drastically increased the accessible supply of natural gas and other energy sources.

Stocks Try for New Highs

The three popular stock index futures contracts tried to make new highs this week and the Dow Jones and S&P almost did it. The tech-heavy NASDQ index contract lagged behind the other indices as earnings and outlook for the younger, high-tech companies underperformed the stock market as a whole. The broader June S&P stock index futures contract came within a hair of making a record on Thursday, but faltered Friday morning, trading at 1869, a full 25 points under the contract high.

Many investors, speculators, and traders prefer to use stock index futures because of the high liquidity, low transaction costs, and ability to track these indices since the media tends to cover the indices on a constant basis. Like grains, metals, or crude oil, they can be bought or sold short depending on a person's market view at any given time. Some participants use these stock index futures to protect or "cover" portfolio risk if they feel a decline in the market is likely to occur. Those who trade the Dow Jones, for example, find that it tends to correlate well to the industrial sector. The S&P, on the other hand, tends to move up and down with our nation's 500 largest corporations.