NYMEX-traded natural gas future contracts for November delivery have been showing an emerging downward trending price channel over the last two months. Prices have rallied after testing key support levels of $2.40 per MMBtu (British thermal units in millions). The consensus of rising natural gas inventory will be the key catalyst along with winter weather estimates for natural gas prices.
Support and resistance
Bulls could see resistance for natural gas prices at $3 per MMBtu. Prices hit this level in April 2015. A harsh winter and lower natural gas inventories could boost natural gas prices. On the other hand, bears could see support at $2.30 per MMBtu for natural gas prices. Prices tested this mark in June 2012. The estimates of the increasing natural gas stockpile and oversupply could push natural gas prices lower.
Citigroup forecast that US natural gas prices could average around $2.70 per MMBtu in 2015 and $3 per MMBtu in 2016. Capital Economics estimated 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) estimates that natural gas prices will average $2.81 per MMBtu in 2015 and $3.11 per MMBtu in 2016.
The US upstream players like Antero Resources (AR), Gulfport Energy (GPOR), Ultra Petroleum (UPL), and Comstock Resources (CRK) benefit from rising natural gas prices. These stocks together account for 4.4% of the SPDR Oil and Gas ETF (XOP). These companies’ natural gas production mixes are greater than 49% of their total production. The uncertainty in the gas market also impacts ETFs like the PowerShares DB Energy Fund (DBE).