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Where Will Natural Gas Close Next Week?

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Feb. 8 2019, Updated 1:12 p.m. ET

Natural gas’s implied volatility

On February 7, natural gas’s implied volatility was 26.7%, which was ~41.3% below its 15-day moving average. In the trailing week, natural gas’s implied volatility fell 9.2%. The natural gas March futures fell 9.3% during the same period. Since June, these two metrics have been moving in tandem. Today at 12:14 PM EST, natural gas prices were 6% lower than they were last week.

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Natural gas prices and the weather forecast

Based on natural gas’s implied volatility of 26.7% and assuming a normal distribution of prices, natural gas futures are expected to close between $2.46 and $2.64 per MMBtu 68.0% of the time until February 15. On February 7, natural gas March futures fell 4.2% to $2.55 per MMBtu, the smallest closing level for active natural gas futures since August 11, 2016. A bearish weather forecast might have dragged down natural gas prices.

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 18.1%. Natural gas prices fell 9.3% during the same period.

Natural-gas-weighted stocks Southwestern Energy (SWN), Chesapeake Energy (CHK), Range Resources (RRC), and Antero Resources (AR) have fallen 14.9%, 13.3%, 12.4%, and 13.2%, respectively, in the trailing week. These stocks are sensitive to changes in natural gas prices.

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