Natural gas price trend
The US natural gas prices are following a long-term bearish trend. However, prices have rallied since the middle of December 2015 after testing the historic low of $1.7 per MMBtu (British thermal units in millions). Natural gas prices are close to the resistance level of $2.4 per MMBtu. Short covering and inventory data have led to the rise of natural gas prices.
Despite the rally, long-term oversupply concerns and mild winter weather could lead to a fall in natural gas prices. Natural gas prices could see support at $1.6 per MMBtu. Prices tested this mark in 1995. Bargain buying and cold winter weather estimates could benefit natural gas prices. The next resistance level for natural gas prices is $3 per MMBtu. Prices tested this mark back in April 2015.
Moving averages and the price chart above suggest natural gas could trade in the range of $2–$3 per MMBtu in the short term. Raymond James, a financial services firm, has stated that natural gas prices could average around $2 per MMBtu in 2016. The EIA (U.S. Energy Information Administration) suggests that US natural gas prices could average around $2.9 per MMBtu in 2016. The government agency could revise its forecast in the next EIA STEO (Short-Term Energy Outlook) report this month. Many banks and financial services firms have downgraded their oil and gas price forecasts for 2016 and 2017.
The recent rise in natural gas prices benefits US upstream players like ConocoPhillips (COP), Cabot Oil & Gas (COG), Southwestern Energy (SWN) and QEP Resources (QEP). The uncertainty in the oil and gas market affects ETFs and ETNs like the Guggenheim S&P 500 Equal Weight Energy ETF (RYE), the Fidelity MSCI Energy Index ETF (FENY), and the VelocityShares 3x Long Natural Gas ETN (UGAZ).