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Will Natural Gas Prices Fall below the Key Support Level?

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Price channel

October natural gas futures contracts were trading just above the nearest support of $2.70 per MMBtu (British thermal units in millions) on September 1, 2015. Prices have been oscillating between $2.60 and $3 per MMBtu for more than three months. Inventory and weather estimates are driving natural gas prices.

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Pivots

Rising natural gas inventories could drive natural gas prices lower. Natural gas prices could see support at $2.60 per MMBtu. Prices tested this level in June 2015. On the other hand, warm weather could push prices higher. Resistance for natural gas prices is seen at $3 per MMBtu. Prices hit this mark in April 2015.

The trading ranges suggest that natural gas prices could oscillate between $2.60 and $3 per MMBtu in the near term. Market surveys suggest that natural gas prices could average around $2.70 per MMBtu in 2015 and $3 per MMBtu in 2016.

Falling natural gas prices negatively impact US upstream players like Range Resources (RRC), Gulfport Energy (GPOR), and Chesapeake Energy (CHK). These companies’ natural gas production mix is more than 49% of their total production. The companies together account for 3.22% of the SPDR Oil and Gas ETF (XOP).

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

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