August natural gas futures contracts trading on the NYMEX resumed their rally on Thursday, July 15, 2015. Prices settled above the key resistance level of $2.90 per MMBtu (British thermal units in millions) yesterday. Prices have been oscillating in a narrow range of $2.70 to $2.90 per MMBtu for the last month. Weather and inventory estimates are driving natural gas prices.
The current momentum could push natural gas prices higher. The consensus of increasing demand due to warm weather could boost natural gas prices. The next resistance for natural gas prices is at $3 per MMBtu. Prices hit this mark in May 2015. On the other hand, oversupply and rising gas stocks could push natural gas prices lower. The key support for gas prices is at $2.50 per MMBtu. Prices last hit this level in April 2015.
The up-trending channel suggests that August natural gas futures could oscillate between $2.50 MMBtu and $3 MMBtu. Industry estimates suggest natural gas prices could average around $3.25 per MMBtu in the second half of 2015. Natural gas prices are trading above their 20- and 50-day moving averages.
The performance of ETFs like the VelocityShares 3X Long Natural Gas ETN (UGAZ) and the United States Natural Gas Fund LP (UNG) benefit by increasing natural gas prices. They also affect energy producers like Memorial Resources (MRD), Magnum Hunter Resources (MHR), and Contango (MCF). Combined, they account for 2.83% of the Spider Oil and Gas ETF (XOP). These stocks’ natural gas production mix is more than 59% of their total production.