Why Natural Gas Futures Have Fallen Again
January natural gas futures contracts fell for the second straight day on Friday, November 27, after testing the critical resistance of $2.3 per MMBtu (British thermal units in millions). Natural gas prices have been in the narrow range of $2.1–$2.3 per MMBtu for the past few days. Mild winter weather is weighing on natural gas prices.
Bearish traders could see support at $2 per MMBtu. Prices hit this level in October 2015. Oversupply concerns and the mild weather forecast could lead prices to fall even further. Bullish traders could see resistance at $3 per MMBtu. Prices tested this mark in April 2015. The demand from power plants could benefit natural gas prices.
The EIA (U.S. Energy Information Administration) forecasts that US natural gas prices could average around $2.69 per MMBtu in 2015 and $3 per MMBtu in 2016. Capital Economics projects that natural gas prices could hit $3.50 per MMBtu by the end of 2015 and $4 per MMBtu by the end of 2016. The natural gas price chart above suggests that natural gas prices could trade in the range of $2–$2.4 per MMBtu in the short term.
The catastrophic fall in natural gas prices affects oil and gas producers like ConocoPhillips (COP), Cimarex Energy (XEC), Newfield Exploration (NFX), and Range Resources (RRC). The ups and down in the oil and gas market also affect ETFs like the PowerShares DB Energy Fund (DBE) and the PowerShares DWA Energy Momentum Portfolio (PXI).
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