Natural Gas Price Prediction – Prices Consolidate Following Robust Rally

Natural gas price consolidated on Tuesday after rising nearly 8% as much colder than normal weather is forecast to cover most of the United States for the next 2-weeks according to the most recent forecast from the National Oceanic Atmospheric Administration. The cold weather will arrive as the beginning of the heating season which is also the beginning of the withdrawal season. Inventories remain well below the 5-year average due to exports of natural gas from the United States that has kept up with rising supply.

Technical Analysis

Natural Gas prices consolidated forming an inside day which is a lower high and a higher low. Resistance is now seen near the 2018 highs at 3.66. Support is seen near the former breakout level near the October highs at 3.24. Additional support is seen near the 20-day moving average at 3.28. Momentum has 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 6-10 day forecast is now showing weather that will be much colder than normal and could generate a surge in natural gas prices.  With inventories well below the 5-year average range prices could continue to rally. The EIA estimates that U.S. natural gas storage inventories were 3.2 trillion cubic feet (Tcf) at the end of October. This level was 16% lower than both the 2017 end-of-October level and the five-year average for the end of October and was the lowest end-of-October level since 2005. Despite low storage levels, EIA expects strong growth in U.S. natural gas production to put downward pressure on prices in 2019. EIA expects the share of U.S. total utility-scale electricity generation from natural gas-fired power plants to rise from 32%.