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Natural Gas Prices: Below the Trading Channel in the Last 3 Months

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Rectangular trading range 

October natural gas futures contracts fell below the support level of $2.64 per MMBtu (British thermal units in millions) for the first time in the last three months. Prices have been fluctuating between a rectangular trading range for almost three months. Mild weather estimates have been putting pressure on natural gas prices.

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Key pivots 

The mild weather forecast and the rising natural gas stockpile could push natural gas prices lower. The nearest support for natural gas prices is seen at $2.60 per MMBtu. Prices hit this mark in June 2015. In contrast, the demand from electric power plants could benefit natural gas prices. Natural gas prices could see resistance at $3 per MMBtu. Prices hit this level in April 2015.

Natural gas price forecast

The rectangular trading range suggests that prices could fluctuate between $2.60 and $3 per MMBtu in the near term. Capital Economics forecasts that natural gas prices could hit $3.50 per MMBtu by the end of 2015 and $4 per MMBtu by the end of 2016. The EIA (U.S. Energy Information Administration) forecasts that natural gas prices could average around $2.84 per MMBtu in 2015 and $3.11 per MMBtu in 2016.

The roller coaster ride of natural gas prices impacts oil and gas producers like Rice Energy (RICE), Chesapeake Energy (CHK), and Range Resources (RRC). Combined, these companies account for 3.01% of the SPDR Oil and Gas ETF (XOP). These companies’ natural gas production mix is more than 49% of their total production.

Energy ETFs like the United States Natural Gas Fund LP (UNG) and the VelocityShares 3X Long Natural Gas ETN (UGAZ) are also impacted by the roller coaster ride of natural gas prices.

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