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Natural Gas Update and Key Price Levels Next Week

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Jan. 25 2019, Updated 8:03 a.m. ET

Natural gas’s implied volatility

On January 24, natural gas’s implied volatility was 56.5%, which was ~26.6% below its 15-day moving average. In the trailing week, natural gas’s implied volatility fell 2.2%. The natural gas March futures fell 5.5% during the same period. Since June, these two metrics have been moving in tandem.

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Natural gas prices and the weather forecast

Based on natural gas’s implied volatility of 56.5% and assuming a normal distribution of prices, natural gas futures are expected to close between $2.78 and $3.22 per MMBtu 68.0% of the time until February 1.

On January 24, natural gas March futures rose 2.6% to $2.998 per MMBtu. The weather forecast suggests colder weather for the next two weeks, which might push natural gas to the upper limit of our price forecast. On January 25 at 7:12 AM EST, natural gas March futures were almost unchanged. On January 25, natural gas’s 200-day moving average at $3.16 will likely be a key resistance zone for natural gas prices. In the last two trading sessions, natural gas prices struggled around this moving average.

Impact on ETFs and stocks

These price limits could be important for ETFs that follow natural gas futures. In the trailing week, the ProShares Ultra Bloomberg Natural Gas ETF (BOIL) fell 10.1%. Natural gas prices fell 5.5% during the same period.

Natural gas–weighted stocks Southwestern Energy (SWN), Chesapeake Energy (CHK), Range Resources (RRC), and Antero Resources (AR) have fallen 2.2%, 4.8%, 6.2%, and 7.1%, respectively, in the trailing week. These stocks underperformed other natural gas–weighted stocks in the trailing week.

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