Natural Gas Prices Could Trade between $2.70 and $3.20 per MMBtu
Oversupply Market: Is the Natural Gas Rally Sustainable?
Uptrend channel
The natural gas futures contract for June delivery shows the emergence of an uptrend channel. Gas prices are fluctuating between $2.70 and $3 per MMBtu (British thermal units in millions) over the last week. Warmer weather and rising inventories are driving natural gas prices. The EIA’s (U.S. Energy Information Administration) gas storage report is due today. It will be the key catalyst for gas prices.
Support and resistance
The recent rally could drive natural gas prices to the next resistance of $3 per MMBtu. Gas prices hit this mark in January 2015. Warmer weather and power plants’ demand could drive natural gas prices higher. In contrast, oversupply factors will continue to drive gas prices lower. The next support for natural gas is seen at $2.50 per MMBtu. Prices hit this level in April 2015.
Natural gas futures for June delivery settled above their 20, 50, and 100-day moving average. The technical catalyst suggests that natural gas prices could fluctuate between $2.70 and $3.20 per MMBtu in the near term. In contrast, the RSI (relative strength index) signals a possible correction.
ETFs like VelocityShares 3X Long Natural Gas ETN (UGAZ) and the United States Natural Gas Fund LP (UNG) benefit from increasing natural gas prices.
Increasing natural gas prices are also positive for upstream companies like Nobel Energy (NBL), Apache (APA), and Laredo Petroleum (LPI). They account for 4.21% of the Spider Oil and Gas ETF (XOP). These upstream companies have a natural gas production mix that’s greater than 40% of their total production portfolio.
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