Natural Gas Price Forecast 2016
The main question is what is the natural gas price forecast 2016, taking into account the longstanding down-trade of this commodity.
The US natural gas prices have been falling since early 2014 without any major recovery, as you can see in the chart below. Prices are in a long-term bearish trend and are nearing to 16-year lows, which means it becomes more expensive for companies to drill for it than to sell it on the market. For this reason there has been a rise in natural gas inventories that could swing prices of natural gas.
The other topic to be discussed is resistance and support lines. Production record of natural gas and natural gas inventory record are surely going to put pressure on its prices in the short term and long term trends. Gas prices could continue in a bearish trend and may seek a support line at $1.60 per MMBtu (million British thermal units). The price for natural gas was at its lowest level over 20 years ago in 1995.
And on the other side of Atlantic, record low US natural gas production and reduction in investments in gas exploration and production may improve natural gas prices, because of upcoming shortages. The resistance line to be tested in gas prices is at $2.40 per MMBtu, the level of January 2016. This may happen in the short term perspective.
As for the longer-term natural gas prediction, it is certain that the prices are not going to go below the $1.50 mark if the down trend-line continues. In the long term, the prices are set to rise.
Apart from natural gas price forecast 2016, below are some of the major forecasts for natural gas prices over the long term.
Firstly, one of the major forces in price predictions, namely, the Economist Intelligence Unit foresees that US natural gas prices would improve to around $3.50 per MMBtu by 2020 or earlier. Secondly, the World Bank's forecast is that US natural gas price could improve to almost $4 per MMBtu by 2020. Thirdly, the IMF (International Monetary Fund) has estimated that US natural gas prices could reach $3.10 per MMBtu by the end of 2018. And the U.S. Energy Information Administration's forecast is that natural gas price could improve to $2.70 and $3.32 in 2016 and 2017, accordingly.
Prices of Natural Gas
If the prices will continue falling, such a humongous fall in natural gas prices will have a deadly impact on the margins of producers such as Devon Energy, Gulfport Energy, Anadarko Petroleum, Cabot Oil & Gas, Comstock Resources, and Memorial Resource Development and other large producers, meaning the prices of their stocks will drop heavily causing some bankruptcies. If we consider that the natural gas output of the mentioned companies is nearly 40%, then the prices are surely to skyrocket because of massive shortages.
The downward trend in the natural gas market impacts power companies and countries with large production as well. If the prices of natural gas continue a down-shifting in short-term, there may be some defaults in the other economic sectors.