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Natural Gas Prices Are Trading within a Rectangular Channel

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Rectangular price channel

September natural gas futures contracts rose for the second day from the key support of $2.60 per MMBtu (British thermal units in millions) on August 26, 2015. Prices have been trading within a rectangular price channel for more than eight weeks. The inventory and weather forecast are influencing natural gas prices.

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Key pivots

The pessimistic sentiments and rising stockpile consensus could drag natural gas price lower. Natural gas prices could see support at $2.60 per MMBtu. Prices tested this level in June 2015. In contrast, warm weather could boost natural gas prices. Resistance for natural gas prices is seen at $3 per MMBtu. Prices hit this mark in April 2015.

The trading range suggests that natural gas prices could fluctuate between $2.60 and $3 per MMBtu in the short term. Market surveys project that natural gas prices could average around $2.70 per MMBtu in 2015 and $3 per MMBtu in 2016.

The rise in natural gas prices benefits oil and gas producers like Range Resources (RRC), Gulfport Energy (GPOR), and Chesapeake Energy (CHK). They account for 3.22% of the SPDR Oil and Gas ETF (XOP). These companies’ natural gas production mix is more than 49% of their total production.

Rising natural gas prices also positively impact ETFs like the VelocityShares 3X Long Natural Gas ETN (UGAZ) and the United States Natural Gas Fund LP (UNG).

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