$4.50 Natural Gas Prices on Horizon (UNG)
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Analysts at Bank of America say the decline in natural gas output may push U.S. prices to $4-$4.50. If analysts are correct, there could be another leg high for the rally United States Natural Gas Fund, LP (NYSE: UNG).
On Friday, Natural gas prices tapped $3.00 per million British thermal units for the first time since January. Despite the bullish sentiment, driven in part by several bullish inventory reports, natural gas prices finished the day lower.
"After an initial spike in prices, the prompt contract appeared to have hit very strong resistance at $3 and the August contract in turn fell by 10 cents an hour after the (storage) data release," Citi analysts said in a note.
Total storage for natural gas is already 75 percent full and hovering at levels not normally reached until late August. But the decline in natural gas prices is forcing production slowdowns, and falling U.S. natural gas production may boost prices to breakeven levels of $4 to $4.50 a million British thermal units, Bank of America Corp. said.
"The incipient decline in U.S. natural gas production, mostly due to the low price environment, will likely continue to push natural gas prices higher toward investment breakeven levels of $4 to $4.50 a million Btu," Francisco Blanch, an analyst for the bank in New York, said in a note dated July 6.
United States Natural Gas Fund, LP (NYSE: UNG) is expected to open higher and is currently trading 1.5 percent higher in early trading on Monday. The futures price of natural gas is currently trading near $2.80 per million British Thermal Units.
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On Friday, Natural gas prices tapped $3.00 per million British thermal units for the first time since January. Despite the bullish sentiment, driven in part by several bullish inventory reports, natural gas prices finished the day lower.
"After an initial spike in prices, the prompt contract appeared to have hit very strong resistance at $3 and the August contract in turn fell by 10 cents an hour after the (storage) data release," Citi analysts said in a note.
Total storage for natural gas is already 75 percent full and hovering at levels not normally reached until late August. But the decline in natural gas prices is forcing production slowdowns, and falling U.S. natural gas production may boost prices to breakeven levels of $4 to $4.50 a million British thermal units, Bank of America Corp. said.
"The incipient decline in U.S. natural gas production, mostly due to the low price environment, will likely continue to push natural gas prices higher toward investment breakeven levels of $4 to $4.50 a million Btu," Francisco Blanch, an analyst for the bank in New York, said in a note dated July 6.
United States Natural Gas Fund, LP (NYSE: UNG) is expected to open higher and is currently trading 1.5 percent higher in early trading on Monday. The futures price of natural gas is currently trading near $2.80 per million British Thermal Units.
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