Rising Natural Gas Production and Inventory Put Pressure on Prices
November natural gas futures contracts fell after testing key resistance of $2.55 per MMBtu (British thermal units in millions) on October 13, 2015. The price fell for the first time after rallying for five consecutive days. The consensus of rising natural gas inventory is driving natural gas prices.
Support and resistance
Bulls could see resistance for natural gas prices at $3 per MMBtu. Prices hit this mark in April 2015. Cold winter weather could boost natural gas prices. On the other hand, bears could see support for natural gas prices at $2.30 per MMBtu. Prices tested this level in June 2012. Rising natural gas stocks will put pressure on natural gas prices.
Citigroup estimates that natural gas prices could average around $2.70 per MMBtu in 2015 and $3 per MMBtu in 2016. The above natural gas price graph suggests natural gas prices could trade between $2.40 and $2.80 per MMBtu. Capital Economics forecast that US natural gas prices could hit $3.50 per MMBtu by the end of 2015 and $4 per MMBtu by the end of 2016.
Uncertainty in natural gas market
Uncertainty in the natural gas market impacts energy producers such as Antero Resources (AR), Range Resources (RRC), Ultra Petroleum (UPL), and Comstock Resources (CRK). These stocks account for 5.4% of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP). These companies’ natural gas production mixes are more than 49% of their total production.
ETFs such as the PowerShares DB Energy ETF (DBE) and the iShares US Oil Equipment & Services ETF (IEZ) are also affected by the uncertainty in the natural gas market.
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