Natural Gas Price Prediction – Prices Consolidate on Declining Demand

Natural gas prices moved lower on Friday ahead of Thursday inventory report from the department of Energy. Prices were unable to hold gains as warmer than normal weather is forecast to cover most of the United States for the next 6-10 and 8-14 days. The warm weather will reduce heating demand at the tail end of the injection season which could buoy inventories.

Technical Analysis

Natural gas prices continued to move sideways and consolidating. Prices held support near the 10-day moving average at 2.82. Resistance is seen near the March highs at 2.90. Medium term momentum has turned negative as the MACD (moving average convergence divergence) index recently generated a crossover sell 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.

Warm Weather and Declining Electricity Demand Erode Natural Gas Demand

Demand falls, driven by residential and commercial sectors. A combination of warmer weather and a decline in manufacturing has eroded demand over the past week. After strong demand for space heating with cold weather during the last report week, total U.S. consumption of natural gas fell by 19% week on week, according to data from the Energy Information Adminstration. In the residential and commercial sectors, consumption declined by 26%. Natural gas consumed for power generation declined by 15% week over week. Industrial sector consumption decreased by 8% week over week. Natural gas exports to Mexico decreased 1%. Overall is was a very bad week for demand. Prices have somewhat remained stable because of a decline in supply and an increase in the volume of LNG export in the latest week.