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Natural Gas Prices Could Rally Due to Short Covering

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Short-term natural gas price trends

The US natural gas prices are following the long-term bearish trend. Prices fell for the second day and are trading close to 16-year lows. The US natural gas inventory report and mild weather forecast are influencing natural gas prices.

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Critical support 

Short covering and bargain hunting could support natural gas prices. The nearest resistance for natural gas prices is seen at $2.40 per MMBtu, and prices hit this level in January 2016.

Pessimist sentiments of oversupply and mild winter weather forecasts could continue to put pressure on natural gas prices. Gas prices could see the important support level of $1.60 per MMBtu. Prices hit this mark in 1995.

Natural gas price forecast 

The EIA (U.S. Energy Information Administration) forecasts that gas prices could average around $2.71 per MMBtu and $3.32 per MMBtu in 2016 and 2017, respectively. Natural gas prices are trading below their key moving averages. So, they might trade lower. Meanwhile, Quantum Gas & Power Services forecasted that US natural gas prices could trade between $1.50–$2.00 per MMBtu in the short term. Financial services firm Raymond James forecasted that US gas prices could average around $2 per MMBtu in 2016.

The roller coaster ride in natural gas prices affect oil and gas producers such as Rice Energy (RICE), Exco Resources (XCO), EQT (EQT), Devon Energy (DVN), Hess (HES), Cabot Oil & Gas (COG), EOG Resources (EOG), Southwestern Energy (SWN), and QEP Resources (QEP).

They also influence ETFs and ETNs such as the Guggenheim S&P 500 Equal Weight Energy ETF (RYE), the Direxion Daily Energy Bull 3x ETF (ERX), the Fidelity MSCI Energy ETF (FENY), and the VelocityShares 3X Long Natural Gas ETN (UGAZ).

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