Why Are Natural Gas Prices Falling?



Natural gas prices

On June 19, natural gas July futures fell 1.7% and settled at $2.9 per MMBtu (million British thermal units). On the same day, Southwestern Energy (SWN), Cabot Oil & Gas (COG), and Chesapeake Energy (CHK) rose 0.2%, 1%, and 1.1%, respectively. These three stocks were the underperformers on our list of natural gas–weighted stocks. All of the natural gas–weighted stocks on our list rose despite the fall in natural gas prices.

On June 19, ETFs that follow natural gas futures, the United States Natural Gas ETF (UNG) and the ProShares Ultra Bloomberg Natural Gas ETF (BOIL) fell 1.5% and 2.4%, respectively.

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Why are natural gas prices falling?

On June 12–19, natural gas July futures rose 1.3%. On June 15, natural gas July futures closed above $3—the highest closing level for active natural gas futures since January 31. Since June 15, natural gas prices have fallen 4%. Normal temperature forecasts across most of the Midwest and Texas could have dragged natural gas prices.

Rising natural gas production could be another concern for natural gas prices. In the next part, we’ll discuss a key driver for natural gas production.

Is more downside possible?

On June 19, natural gas active futures closed 2.6%, 4%, and 0.8% above their 50, 100, and 200-day moving averages, respectively. On the same day, natural gas prices closed 0.9% below their 20-day moving average—the first time since May 9. Natural gas active futures closing below the shorter term moving average might indicate some short-term weakness.

However, the 200-day moving average at $2.87 is an important support for natural gas prices. If natural gas prices break below this level, a strong downside in natural gas prices might be possible.


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