September natural gas futures contracts rose for the third day in a row. The prices have been trading close to the key resistance of $2.90 per MMBtu (British thermal units in millions). Natural gas prices have been trading within a narrow range between $2.70 and $2.90 per MMBtu since the mid-week of June 2015. The tug-of-war between rising natural gas stocks and warm weather estimates is driving natural gas prices.
The estimates of a rise natural gas inventory could drag natural gas prices lower. The key support for gas prices is seen at $2.50 per MMBtu. Prices hit this mark in April 2015. In contrast, estimates of warm weather could drive natural gas prices higher. The important resistance for gas prices is seen at $3 per MMBtu. Prices hit this level in May 2015.
The trading range suggests that prices could fluctuate between $2.60 and $3 per MMBtu in the short term. Natural gas prices could average around $2.85 per MMBtu in 2015, according to the forecast from Bank of America Merrill Lynch (BAML).
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 oil and gas producers like QEP Resources (QEP), Gulfport Resources (GPOR), and EQT (EQT). Combined, they account for 3.46% of the SPDR Oil and Gas ETF (XOP). These companies’ natural gas production mix is more than 59% of their total production.