High inventories

US natural gas inventories are currently 11% higher than their five-year average. High natural gas inventories could weigh on US natural gas prices. For more on US natural gas prices, read Part Two of this series.

Lower natural gas prices have a negative impact on the earnings of oil and gas producers such as Range Resources (RRC), EXCO Resources (XCO), WPX Energy (WPX), and Memorial Resources (MRD).

NYMEX Natural Gas Prices: Long-Term Forecasts

Seasonal weather conditions will have a short-term impact on natural gas prices due to the change in demand for natural gas. For more on the weather, read Part One of this series.

US natural gas price forecast  

The International Monetary Fund (or IMF) forecasts that US natural gas prices will average $2.3 per MMBtu (million British thermal units) in 2016, $3 per MMBtu in 2017, $3.1 per MMBtu in 2018, and $3.3 per MMBtu in 2019, respectively.

Aegent Energy Advisors estimates that US natural gas prices may not exceed $2.70 per MMBtu in September 2016. They also may not exceed $2.80 per MMBtu from September to October 2016. Prices are expected to trade below $3.27 per MMBtu this winter from November 2016 to March 2017.

The EIA (U.S. Energy Information Administration) reported that US natural gas prices would average $2.41 per MMBtu in 2016 and $2.95 per MMBtu in 2017.

The World Bank forecasts that US natural gas prices will average $2.30 per MMBtu in 2016, $3.00 per MMBtu in 2017, and $3.50 per MMBtu in 2018.

Higher natural gas prices have a positive impact on the earnings of oil and gas producers such as Range Resources, EXCO Resources, WPX Energy, and Memorial Resources.

Prices also impact funds such as the VelocityShares 3x Inverse Natural Gas ETN (DGAZ), the PowerShares DWA Energy Momentum ETF (PXI), the United States Natural Gas ETF (UNG), and the Direxion Daily Natural Gas Related Bull 3X Shares ETF (GASL).

For related analysis, you can visit Market Realist’s Energy and Power page.

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