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Memo to Energy Investors—Watch for Rising Crude Oil Production

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Part 5
Memo to Energy Investors—Watch for Rising Crude Oil Production PART 5 OF 5

Could Natural Gas Break below the $2.80 Level Next Week?

Natural gas’s implied volatility

On July 13, 2017, US natural gas’s implied volatility fell 1.2% compared to its 15-day moving average to 33.1%. US natural gas (BOIL) (GASX) (UGAZ) futures and implied volatility frequently move inversely. For example, in the week ended July 13, 2017, natural gas active futures rose 2.5%, and its implied volatility fell 2.6%. 

Could Natural Gas Break below the $2.80 Level Next Week?

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On the other hand, natural gas’s implied volatility reached 54.5% on March 1, 2016. On March 3, 2016, natural gas active futures settled at their 17-year low. Since then, natural gas’s implied volatility has fallen 39.3%, while natural gas futures gained 70.1%.

Where could natural gas prices move next week?

There is a 68% chance that US natural gas active futures could close between $2.82 and $3.10 per million British thermal units in the next seven days. This price range is derived assuming normally distributed prices and a standard deviation of 1. We used natural gas’s latest implied volatility of 33.1% in this calculation.

US natural gas active futures closed at $2.96 per million British thermal units on July 13, 2017. So, the oil and natural gas rig count and the weather forecast could be key for natural gas prices. If the oil and natural gas rig counts rise, then the $2.80 level could be tested.

These key price levels for natural gas should also be important for ETFs such as the United States Natural Gas Fund LP (UNG), the Direxion Daily Natural Gas Related Bull ETF (GASL), and the Direxion Daily Natural Gas Related Bear 3X ETF (GASX).

To learn more about natural gas prices, please check out our recent coverage on natural gas.

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