August natural gas futures are trading within a channel as of June 30, 2015. Prices have been fluctuating between $2.60 and $3 per MMBtu (British thermal units in millions) for the past three months. The tug-of-war between normal weather estimates and warmer weather surveys are swinging natural gas prices.
Support and resistance
The warmer weather consensus and demand from power plants could drive natural gas prices higher. The key resistance is seen at $3.20 per MMBtu. Prices hit this mark in January 2015. In contrast, the mild weather forecast and rising gas stockpile could push natural gas prices to the nearest support of $2.50 per MMBtu. Prices tested this level in April 2015.
The trading range suggests that gas prices could fluctuate between $2.40 MMBtu and $3.20 MMBtu in the short term. The industry consensus suggests that natural gas prices could vary between $2.50 and $3 per MMBtu over the next four months. August natural gas futures contracts are trading below their 100-day moving average.
ETFs like the VelocityShares 3X Long Natural Gas ETN (UGAZ) and the United States Natural Gas Fund LP (UNG) benefit from rising natural gas prices. They also benefit energy producers like Energen (EGN), Range Resources (RRC), and Bill Barrett (BBG). Combined, they account for 2.47% of the Spider Oil and Gas ETF (XOP). These stocks have natural gas production mix that’s more than 41% of their total production.