October natural gas futures contracts have been showing the emergence of a rectangular trading range since June 2015. Prices are trading within a narrow channel of $2.65 per MMBtu (British thermal units in millions) and $2.75 per MMBtu over the last ten days. Weather is playing a vital role in driving natural gas prices in the oversupplied market.
Lower natural gas prices, demand from power plants, and warm weather could support natural gas prices. The next resistance for natural gas prices is seen at $3 per MMBtu. Prices hit this mark in April 2015. In contrast, weak demand and oversupply concerns could push natural gas prices lower. Natural gas prices could see support at $2.60 per MMBtu. Prices tested this level in June 2015.
The EIA (U.S. Energy Information Administration) estimates that natural gas prices could average around $2.89 per MMBtu in 2015 and $3.21 per MMBtu in 2016. Citigroup forecasts that natural gas prices could average around $2.70 per MMBtu in 2015 and $3 per MMBtu in 2016. Bank of America Merrill Lynch (BAML) forecast that natural gas prices could trade around $2.85 per MMBtu in 2015.
The volatility in natural gas prices impacts oil and gas players like Gulfport Energy (GPOR), Antero Resources (AR), and Range Resources (RRC). These companies account for 3.34% of the SPDR Oil and Gas ETF (XOP). These stocks’ natural gas production mix is more than 49% of their total production.