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Bearish Momentum: Natural Gas Prices Could Fall More

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Nov. 12 2015, Published 10:58 a.m. ET

Downward trending trading range  

December natural gas futures contracts are edging towards the key support of $2.20 per MMBtu (British thermal units in millions) as of November 11, 2015. Prices have been fluctuating between $2 per MMBtu and $2.40 per MMBtu due to changing weather and inventory estimates.

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Key pivots 

Lower natural gas prices and the demand from power plants could support natural gas prices. Natural gas prices could see resistance at $3 per MMBtu. Prices hit this mark in April 2015. On the other hand, the consensus the rising inventory and mild winter could drag natural gas prices lower. Natural gas prices could see support at $2 per MMBtu. Prices hit this mark in October 2015.

The long-term bearish momentum could drag natural gas prices lower. The 20-day and 50-day moving averages are below the natural gas prices as of November 11, 2015. The natural gas price chart suggests that natural gas prices could fluctuate between $2 per MMBtu and $2.40 per MMBtu in the near term. The EIA (U.S. Energy Information Administration) forecasts that gas prices could average around $2.69 per MMBtu in 2015 and $3 per MMBtu in 2016.

Energy producers’ margins like Noble Energy (NBL), Pioneer Natural Resources (PXD), Newfield Exploration (NFX), Cimarex Energy (XEC), and Comstock Resources (CRK) are impacted by lower natural gas prices. Combined, they account for 5.4% of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP). These stocks’ natural gas production mixes are greater than 49% of their production portfolio.

ETFs like the VelocityShares 3x Inverse Natural Gas ETN (DGAZ) and the PowerShares DWA Energy Momentum ETF (PXI) are also impacted by the uncertainty in the energy market.

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