Natural Gas Price Predication – Prices Rise but Downtrend Remains

Natural gas prices moved higher on Friday but remain in a downtrend. The surprise increase in inventories this past week, generated another leg down in prices.  Supply remain flat but expectations are that additional production will weigh on inventories.  The increase in crude oil production over the past week is likely to spill over into natural gas production. Demand is falling as the warmer than normal weather that is expected to cover most of the US will erode heating demand.

Technical Analysis

Prices continue to form a downtrend. Despite Friday’s uptick in prices, the lower low and lower high describe a downtrend. Support is seen near the February lows at 2.54. Resistance is seen near the 10-day moving average at 2.69. Momentum remains negative as the MACD (moving average convergence divergence) index recently generated a crossover signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses below the MACD signal line (the 9-day moving average of the MACD line). The MACD histogram is printing in the red with a downward sloping trajectory which points to lower prices.

The EIA Reports Flat Supply

Supply remains flat according to data from the Energy Information Administration. The average total supply of natural gas remained the same as in the previous report week, averaging 94.6 Bcf per day. Dry natural gas production remained constant week over week. Average net imports from Canada increased by 2% from last week, but were 16% lower than last year at this time.

Demand Declined

Demand fell during the period week, as temperatures moderated. Total U.S. consumption of natural gas fell by 4% compared with the previous report week, according to data from the EIA. Natural gas consumed for power generation climbed by 2% week over week. Industrial sector consumption decreased by 1% week over week. In the residential and commercial sectors, consumption declined by 12% as overall warmer temperatures across the country led to lower heating demand. Natural gas exports to Mexico increased 1%.