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Is $2.90 Possible for Natural Gas This Week?

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Apr. 30 2018, Published 7:19 a.m. ET

Natural gas’s implied volatility

On April 26, natural gas’s implied volatility was 21.2%. That was 2.8% less than its 15-day moving average.

Between April 19 and April 26, natural gas June futures rose 5.3%, but its implied volatility fell 9.4%. From September 2017 through April 13, 2018, the two variables have broadly moved together. However, the two indicators have recently started moving inversely.

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Price forecast

Between April 27 and May 3, with a 68% probability, natural gas futures could close between $2.77 and $2.91 per MMBtu (million British thermal unit) based on natural gas’s implied volatility of 21.2% and assuming that prices are normally distributed.

On April 26, natural gas June futures closed at $2.84 per MMBtu. Given the bullish demand drivers discussed in Part 1 of this series, natural gas prices might hit the upper limit of the price forecast at $2.91.

The United States Natural Gas ETF (UNG) and the ProShares Ultra Bloomberg Natural Gas (BOIL) track natural gas futures. Between April 19 and April 26, natural gas June futures rose 5.3%. UNG and BOIL rose 4.3% and 8%, respectively, in that period.

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