Will Natural Gas Prices Make a U-turn at $2.3 per MMBtu?



Price channel 

December natural gas futures contracts are showing the start of a falling trend. Prices have been oscillating between $2.30 per MMBtu (British thermal units in millions) and $2.60 per MMBtu since October. The consensus of rising natural gas inventory could push natural gas prices lower than the key resistance of $2.30 MMBtu.

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Key pivots 

Natural gas prices could rise in the short term and see resistance at $3 per MMBtu. Prices tested this mark in April 2015. By contrast, oversupply concerns could drag natural gas prices lower. Natural gas prices could see support at $2 per MMBtu. Prices hit this mark in October 2015.

The EIA (U.S. Energy Information Administration) forecasts that US natural gas prices could average around $2.8 per MMBtu in 2015 and $3.1 per MMBtu in 2016. Goldman Sachs (GS) forecasts that natural gas prices could average around $2.7 per MMBtu in 4Q15. Bank of America Merrill Lynch (BAML) projects that gas prices could average around $2.85 per MMBtu in 2015. The gas price chart above suggests that natural gas prices could fluctuate between $2 and $2.60 per MMBtu in the short term.

The catastrophic fall in natural gas prices impacted energy producers such as Rice Energy (RICE), Newfield Exploration Company (NFX), Cimarex Energy (XEC), Gulfport Energy Corporation (GPOR), and Comstock Resources (CRK). These stocks’ natural gas production mixes are greater than 49% of their production portfolios. These companies account for 5.4% of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP). The volatility in the oil and gas market also impacts the VelocityShares 3x Inverse Natural Gas ETN (DGAZ) and the iShares US Oil Equipment & Services ETF (IEZ).


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