Natural Gas Price Analysis for March 7, 2018

Natural gas prices pushed higher on Tuesday hitting a fresh 18-day high, closing up 1.5% and poised to test target resistance.  Prices were buoyed by colder than normal weather and another nor’easter which is expected to slam the east coast of the United States on Wednesday. Colder than normal weather is expected to cover most of the East Coast of the United States over the next 8-14 days according to the National Oceanic Atmospheric Administration. Record natural gas production according to the most recent monthly energy outlook from the Department of Energy should keep a lid on prices.

Technicals

Natural gas is poised to test target resistance near the 50-day moving average near 2.886. Support is seen near the 10-day moving average at 2.675. Momentum has recently turned positive as the MACD (moving average convergence divergence) index generated a crossover buy signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses above the MACD signal line (the 9-day moving average of the MACD line). The relative strength index (RSI) also hit a fresh 3-week high which reflects accelerating positive momentum. Prices are poised to cross through the middle of the neutral range which also reflects accelerating positive momentum.

EIA Estimates Record Natural Gas Production

EIA estimates that U.S. dry natural gas production averaged 73.6 billion cubic feet per day in 2017. EIA forecasts that natural gas production will average 81.7 Bcf/d in 2018, establishing a new record. That level would be 8.1 Bcf/d higher than the 2017 level and the highest annual average growth on record. EIA expects natural gas production will also increase in 2019, with forecast growth of 1.0 Bcf/d.

EIA expects natural gas prices to moderate in the coming months, based on a forecast of record natural gas production levels. EIA expects Henry Hub spot prices to average 2.72/MMBtu in March and 2.99/MMBtu for all of 2018. In 2019, EIA forecasts prices will average 3.07/MMBtu.