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Natural Gas: What to Expect This Week


Jul. 1 2019, Updated 2:11 p.m. ET

Natural gas’s implied volatility

On June 27, natural gas’s implied volatility was ~33%—4% above its 15-day moving average. The implied volatility fell ~4.9% in the trailing week, while active futures rose 7.3%. Since February, natural gas’s prices and implied volatility have been diverging.

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Price forecast

Based on natural gas’s implied volatility of ~33% and assuming a normal distribution of prices, natural gas futures could close between $2.23 and $2.41 per MMBtu (million British thermal units) 68.0% of the time until July 4. On June 27, natural gas August futures rose 2.5% to $2.324 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 last week, the ProShares Ultra Bloomberg Natural Gas ETF (BOIL) rose 12%, while the United States Natural Gas ETF (UNG) rose 6%. These ETFs invest in natural gas futures. UNG and BOIL could benefit if natural gas rises more.

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 (SPY) and the Dow Jones Industrial Average (DIA) can also be impacted by changes in energy commodities.


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