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Natural Gas Price Prediction – Prices Consolidate But Demand Rises

Prices consolidate as the weather remains warm
David Becker

Natural gas prices traded sideways on Monday and are attempting to stabilize after falling 1.7% last week.  Demand rose last week despite mixed weather as it was driven by power generation and buildings sectors. The weather over the next 6-10 and 8-14 days is expected to be colder than normal in the west and much warmer than normal in then east, which is keeping prices capped. Hedge fund traders remain short, but new information is yet to be available as the CFTC’s commitment of trader’s report is delayed due to the New Year’s Day holiday.

Technicals

Natural gas prices were nearly unchanged on Monday. Prices remain below short term resistance which is the December continuation contract lows at 2.15. Additional resistance is seen near the 10-day moving average near 2.20. Support on natural gas prices can be seen by looking at a long term trend line on a weekly chart that comes in near 2.07. Momentum has now turned negative as the MACD (moving average convergence divergence) index generated a crossover sell signal. This occurs as the MACD index (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. Short term momentum has turned positive as the fast stochastic rebounded from below the 20-oversold trigger level which points to a possible rebound.

Demand increased driven by power generation and building sectors. Total US consumption of natural gas rose by 7% compared with the previous report week, according to the EIA. Natural gas consumed for power generation climbed by 7% week over week. Industrial sector consumption increased by 5% week over week. In the residential and commercial sectors, consumption increased by 7%. Natural gas exports to Mexico were the same as last week, averaging 5.3 Bcf per day.

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