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Inventory Data Might Push Natural Gas near $3.2 Next Week

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Natural gas’s implied volatility

On September 27, natural gas’s implied volatility was 28.3%, which was ~17.9% above its 15-day moving average and the highest level since February 23. In the trailing week, natural gas’s implied volatility rose 10.5%. Natural gas November futures rose 3.1% during the same period. Since June, these two metrics have been moving in tandem.

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Price forecast

Based on natural gas’s implied volatility of 28.3% and assuming a normal distribution of prices, natural gas futures are expected to close between $2.95 and $3.17 per MMBtu (million British thermal units) 68.0% of the time until October 5.

Low inventory might push natural gas

On September 27, natural gas November futures rose 2.6% to $3.056 per MMBtu (million British thermal units). On the same day, the EIA reported that natural gas inventories rose by 46 Bcf (billion cubic feet) last week. A Reuters poll suggested that the inventories might rise by 64 Bcf for the same week. The bullish inventory data might help natural gas gain more next week. The upper limit of our price forecast will be important for natural gas traders.

Impact on ETFs and stocks

These price limits could be important for ETFs that follow natural gas futures like the ProShares Ultra Bloomberg Natural Gas ETF (BOIL). In the trailing week, BOIL rose 7%. Natural gas prices rose 3.1% during the same period.

Among the natural gas–weighted stocks, Southwestern Energy (SWN), Range Resources (RRC), Cabot Oil & Gas (COG), and Chesapeake Energy (CHK) have returns of -7.6%, -4.5%, 0.3%, and 1.1%, respectively. These stocks outperformed other natural gas–weighted stocks in the trailing week. The remaining natural gas–weighted stocks ended in the red during this period.

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