Natural gas futures contracts for October delivery fell for five consecutive days and broke below the key the support level of $2.60 per MMBtu (British thermal units in millions) for the first time in the last five months. Prices have been trading within a narrow channel for the past three months. The rising natural gas stockpile is putting pressure on natural gas prices.
Support and resistance
The warm weather forecast and lower natural gas prices could boost consumption and benefit natural gas prices. The next resistance for natural gas prices could be seen at $3 per MMBtu. Prices tested this mark in April 2015. In contrast, long-term oversupply concerns could push natural gas prices lower. Natural gas prices could see support at $2.50 per MMBtu. Prices tested this mark in April 2015.
Gas prices could trade around $2.84 per MMBtu in 2015 and $3.11 per MMBtu in 2016, according to the EIA’s (U.S. Energy Information Administration) estimates. The natural gas price chart suggests that prices could fluctuate between $2.50 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.
Crude oil and natural gas producers like EXCO Resources (XCO), Chesapeake Energy (CHK), and Range Resources (RRC) are impacted by falling natural gas prices. These stocks account for 2.89% of the SPDR Oil and Gas ETF (XOP). These stocks’ natural gas production mix is greater than 49% of their total production.