Natural Gas Market Is Influenced by Weather and Inventory
Trading range
Natural gas futures contracts for October delivery rose for the second consecutive day. Prices have been fluctuating within a narrow price channel of $2.65–$2.75 per MMBtu (British thermal units in millions) in the past ten trading sessions. Inventory estimates and weather estimates could drive natural gas prices in the short term.
Support and resistance
The bearish trader could see support for natural gas prices at $2.60 per MMBtu. Prices hit this mark in June 2015. The long-term oversupply concerns could drag natural gas prices lower. In contrast, warm weather estimates could benefit natural gas prices. The nearest resistance for natural gas prices is seen at $3 per MMBtu. Prices tested this level in April 2015.
The US natural gas prices could trade around $2.85 per MMBtu in 2015, according to estimates from Bank of America Merrill Lynch (BAML). The natural gas price chart suggests that natural gas prices could trade between $2.60 and $3 per MMBtu in the short term. Citigroup estimates that natural gas prices could average around $2.70 per MMBtu in 2015 and $3 per MMBtu in 2016.
The roller coaster ride in natural gas prices affects upstream players like Cabot Oil & Gas (COG), Antero Resources (AR), and Range Resources (RRC). They account for 3.11% of the SPDR Oil and Gas ETF (XOP). These companies’ natural gas production mix is greater than 49% of their total production.
Energy ETFs like the United States Natural Gas Fund LP (UNG) and the VelocityShares 3X Long Natural Gas ETN (UGAZ) are influenced by the roller coaster ride in natural gas prices.
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