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Natural Gas Prices Are Trading within the Channel

Gordon Kristopher

Oversupply Overshadowed the Falling Natural Gas Inventory

(Continued from Prior Part)

Trading channel  

January natural gas futures contracts are holding above the key support level of $2 per MMBtu (British thermal units in millions) for the fourth straight day. Prices are trading within a downward trending channel. The rising supplies are weighing on the natural gas market.

Support and resistance 

Bullish traders could see a rise in the natural gas prices due to a rise in the demand from power plants. The next resistance for natural gas prices is $3 per MMBtu. Prices hit this level in April 2015.

Bearish traders could see mild winter weather and oversupply concerns drag natural gas prices. The nearest support for natural gas prices is seen at $2 per MMBtu. Prices tested this mark in December 2015.

The EIA (U.S. Energy Information and Administration) estimates that US natural gas prices could average around $2.67 per MMBtu in 2015 and $2.88 per MMBtu in 2016. Citigroup estimates that natural gas prices could average around $2.70 per MMBtu in 2015 and $3 per MMBtu in 2016. Bank of America Merrill Lynch (BAML) estimates that natural gas prices could average around $2.85 per MMBtu in 2015.

The long-term lower natural gas prices impact oil and gas producers like EXCO Resources (XCO), Southwestern Energy (SWN), Chesapeake Energy (CHK), and Range Resources (RRC). They also impact ETFs like the PowerShares DB Energy ETF (DBE) and the PowerShares DWA Energy Momentum ETF (PXI).

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