Natural Gas Prices March Toward Next Resistance
Natural Gas Rallies Last Week from Lower Inventory, Milder Weather
Downtrend price channel
On October 9, 2015, November natural gas future contracts rose from the key support of $2.40 per MMBtu (British thermal units in millions) for the fourth consecutive day. Prices have been trading on a downward trending price channel for the past two months. Weather and inventory data are driving natural gas prices.
Key pivots
Record natural gas stockpiles and mild weather could push natural gas prices lower. Natural gas prices could see support at $2.30 per MMBtu. Prices hit this level in June 2012. On the other hand, the current bullish momentum could push natural gas prices higher. The nearest resistance for natural gas prices is seen at $3 per MMBtu. Prices tested this level in April 2015.
The downward trending channel suggests natural gas prices could oscillate between $2.40 and $2.80 per MMBtu. The EIA (U.S. Energy Information Administration) forecasts that US natural gas prices will average $2.81 per MMBtu in 2015 and $3.11 per MMBtu in 2016. Natural gas prices could average around $2.85 per MMBtu in 2015 according to estimates from Bank of America Merrill Lynch (or BAML).
US oil and gas players such as Range Resources (RRC), Ultra Petroleum (UPL), and Comstock Resources (CRK) benefit from rising natural gas prices. These companies account for 4.4% of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP). These stocks’ natural gas production mixes are greater than 49% of their total production.
Volatility in the natural gas market also impacts ETFs such as the PowerShares DB Energy ETF (DBE) and the iShares U.S. Oil Equipment & Services ETF (IEZ).
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