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Natural Gas Prices: How Low Can They Go?

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Dec. 24 2015, Updated 8:06 a.m. ET

Price trends  

The US natural gas futures contracts for January delivery fell for the first time in the last three days. Prices are trading close to 16-year lows. Gas prices are following the long-term bearish trend. Inventories and the weather forecast could drive the natural gas market.

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Key support and resistance 

Record production, record inventory, and mild winter weather will continue to put pressure on natural gas prices. Gas prices could see the next support at $1.60 per MMBtu (million British thermal units). Prices hit this mark in 1995. On the other hand, bargain buying and a cold winter could support natural gas prices. Natural gas prices could see resistance for its $3 per MMBtu. Prices hit this mark in April 2015.

Current natural gas prices are trading below their 20-day, 50-day, and 100-day moving averages as of December 22, 2015. The price chart and moving averages suggest that prices could trade lower. Citigroup estimates that natural gas prices could average around $2.70 per MMBtu in 2015 and $3 per MMBtu in 2016. The EIA (U.S. Energy Information Administration) projects that gas prices could average around $2.67 per MMBtu in 2015 and $2.88 per MMBtu in 2016. The current momentum could push natural gas prices to new lows.

US natural gas producers such as Exco Resources (XCO), Cimarex Energy (XEC), Cabot Oil & Gas (COG), Rice Energy (RICE), and Range Resources (RRC) would be affected by lower natural gas prices. ETFs such as the PowerShares DB Energy ETF (DBE) and the PowerShares DWA Energy Momentum ETF (PXI) are also affected by uncertainty in the energy market.

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