NYMEX-traded August natural gas futures contracts closed just above the nearest support level of $2.80 per MMBtu (British thermal units in millions) on July 2, 2015. Prices have been fluctuating in a narrow range of $2.70 and $2.85 per MMBtu for the last ten trading days. The rising gas stockpile and warmer weather forecast are swinging natural gas prices.
Support and resistance
The current momentum could swing natural gas prices in the either direction. The bears say that gas prices could test the support of $2.50 per MMBtu. Prices tested this level in April 2015. Mild weather estimates and record inventories will continue to put pressure on natural gas prices. In contrast, renewed demand from power plants might boost natural gas prices. The key resistance for natural gas prices is seen at $3.20 per MMBtu. Gas prices hit this level in January 2015.
The trading range suggests that gas prices could fluctuate between $2.50 MMBtu and $3.20 MMBtu in the short term. Industry consensus suggests that natural gas prices could average around $3 per MMBtu in 2015. August natural gas prices are below their 50 and 100-day moving averages.
ETFs like the VelocityShares 3X Long Natural Gas ETN (UGAZ) and the United States Natural Gas Fund LP (UNG) are positively affected by rising natural gas prices. Upstream companies like QEP Resources (QEP), Contango (MCF), and Comstock Resources (CRK) are also affected by volatility in natural gas prices. They account for 3% of the Spider Oil and Gas ETF (XOP). These stocks have gas production mix that’s more than 59% of their total production.