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Natural Gas Prices Are Trading near the Key Support Again

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Trading range 

Natural gas futures contracts for October delivery fell for the second day. They’re trading close to the key support of $2.65 per MMBtu (British thermal units in millions) on September 17, 2015. Prices have been fluctuating within a trading range for the last two months. The estimates of a larger-than-expected inventory increase is putting pressure on natural gas prices.

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Support and resistance 

The estimates of the rising natural gas stockpile and oversupply concerns could put pressure on natural gas prices. Natural gas prices could see support at $2.60 per MMBtu. Prices tested this level in June 2015. In contrast, warm weather and lower natural gas prices could support natural gas prices. The nearest resistance for natural gas prices could be seen at $3 per MMBtu. Prices tested this mark in April 2015.

US natural gas prices could average around $2.85 per MMBtu in 2015, according to estimates from Bank of America Merrill Lynch (BAML). The natural gas price chart suggests that natural gas prices could fluctuate between $2.60 and $3 per MMBtu in the short term. Capital Economics estimates 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 swinging natural gas prices affect natural producers like Southwestern Energy (SWN), Chesapeake Energy (CHK), and Range Resources (RRC). They account for 3.01% of the SPDR Oil and Gas ETF (XOP). These stocks’ natural gas production mix is greater than 49% of their total production.

Oil and gas ETFs like the VelocityShares 3X Long Natural Gas ETN (UGAZ) and the United States Natural Gas Fund LP (UNG) are also impacted by the volatility in natural gas prices.

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