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Natural Gas: Key Price Level This Week

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Jun. 10 2019, Published 8:05 a.m. ET

Natural gas’s implied volatility

On June 7, natural gas’s implied volatility was 31.7%—22.9% more than its 15-day moving average. The company’s implied volatility has risen ~14.5% in the trailing week, while active futures have fallen 4.8%. Since February, the prices and implied volatility have been diverging.

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Price forecast

Based on natural gas’s implied volatility of 31.7% and assuming a normal distribution of prices, natural gas futures are expected to close between $2.25 and $2.42 per MMBtu (million British thermal units) 68.0% of the time until June 14. On June 7, natural gas July futures rose 0.6% to $2.34 per MMBtu.

Impact on ETFs, stocks, and the broader market

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 9.2%, while the United States Natural Gas ETF (UNG) fell 4.8%. These ETFs invest in natural gas futures. If natural gas falls to $2.25, a new multiyear low, UNG and BOIL would be impacted negatively.

Similarly, natural gas–weighted stocks like Southwestern Energy (SWN), Chesapeake Energy (CHK), Range Resources (RRC), and Antero Resources (AR) are sensitive to changes in natural gas prices. Broader market indexes like the S&P 500 Index (SPY) and the Dow Jones Industrial Average (DIA) can also be impacted by changes in energy commodities.

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