Natural Gas Price Prediction – Gas Trades on the Defensive as Demand Dips

Natural gas prices rebounded on Monday, after hitting a fresh 2-month low. Prices made a lower low and a lower high which is a sign of a downtrend. The weather pattern released by NOAA in the afternoon in the U.S. on Monday shows warmer than normal weather covering most of the west and east but colder than normal weather covering most of the mid-west for the next 6-10 and 8-14 days. It appears traders are focused on the cool weather in the mid-west despite lower than average inventories.  Current inventories are below the 5-year average but above the lower end of the 5-year average range. Prices have been trading on the defensive due to declining demand.

Technicals

Support on natural gas prices is seen near an upward sloping trend line that connects the lows in February and March and comes in near 2.67.  Resistance is seen near the 10-day moving average which comes in near 2.82. Momentum remains negative as the MACD (moving average convergence divergence) histogram prints near in the red with a downward sloping trajectory. The fast stochastic on the other hand has generated a crossover buy signal in oversold territory which reflects accelerating positive momentum. The current reading on the fast stochastic is 8, well below the oversold trigger level of 20, which could foreshadow a correction in natural gas prices.

Prices Trade Lower on Declining Demand

Prices have been trading on the defensive as overall demand declines. The EIA reports that total U.S. consumption of natural gas fell by 1% compared with the previous report week. Natural gas consumed for power generation declined by 4% week over week, led by a 15% decrease in the Northeast. A 26% increase in power burn in the Western region was not enough to offset this decrease. Industrial sector consumption increased by 1% week over week. In the residential and commercial sectors, consumption increased by 9%. Natural gas exports to Mexico increased 3%.