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Natural Gas Prices Close above the Key Support Level

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Natural gas prices drop for the second session

Natural gas futures for July delivery followed its long-term downtrend on June 4, 2015. Record inventories, mild weather estimates, and slowing demand are influencing natural gas prices in the near term.

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Key support

Oversupply concerns and increasing inventories will continue to put pressure on natural gas prices. The key support for natural gas is seen at $2.50 per MMBtu (British thermal units in millions). Gas prices tested this mark in April 2015. In contrast, warmer weather forecasts could drive natural gas prices higher. The key resistance for natural gas prices is seen at $3.20 per MMBtu. Prices hit this mark in January 2015.

Natural gas prices might average around $2.93 per MMBtu in 2015, according to EIA (U.S. Energy Information Administration) sources. Prices could fluctuate between $2.50 and $3 per MMBtu through October 2015, according to Societe Generale forecasts. The technical pattern suggests that gas prices could fluctuate between $2.50 and $3 per MMBtu in the near term.

ETFs like the United States Natural Gas Fund LP (UNG) and the VelocityShares 3X Long Natural Gas ETN (UGAZ) are negatively impacted by declining natural gas prices.

Upstream players like Occidental Petroleum (OXY), Carrizo Oil and Gas (CRZO), and EOG Resources (EOG) are also affected by declining natural gas prices. These companies account for 2.88% of the Spider Oil and Gas ETF (XOP). Their production portfolios have a 41% natural gas production mix.

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