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Natural Gas Prices Hit 4-Week Low and Settle above Key Support

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Natural gas prices resume a downtrend

July natural gas futures contracts trading in NYMEX resumed a downtrend after increasing for the past two days. Gas prices continued to trade within the downward trending channel on June 3, 2015. The mild weather forecast and consensus of an increasing stockpile are impacting natural gas prices.

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Key pivots

The bearish sentiments of natural gas prices could push natural gas prices lower. The nearest support for natural gas is seen at $2.50 per MMBtu (British thermal units in millions). Prices hit this level in April 2015. The estimates of rising inventories and oversupply factors might drive natural gas prices lower. In contrast, if warmer weather lasts longer it could push natural gas higher. The nearest resistance for natural gas is seen at $3.20 per MMBtu. Prices tested this level in January 2015.

Societe Generale expects that natural gas prices could trade around $2.50–$3 per MMBtu through October 2015—led by the record stockpile. The downtrend channel suggests that gas prices could fluctuate between $2.50 and $3 per MMBtu in the short term. The EIA (U.S. Energy Information Administration) forecasts that natural gas prices could average around $2.93 per MMBtu in 2015 and $3.32 per MMBtu in 2016.

The performance of ETFs—like the United States Natural Gas Fund LP (UNG) and the VelocityShares 3X Long Natural Gas ETN (UGAZ)—is negatively affected by decreasing natural gas prices.

Oil and gas producing companies like Carrizo Oil and Gas (CRZO), Occidental Petroleum (OXY), and EOG Resources (EOG) are also impacted by lower gas prices. Combined, these stocks 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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