Natural Gas Price Prediction – Prices Continue to Rise on Cold weather Forecast

Natural gas prices continue to move higher on Tuesday after breaking out on Monday. Prices tested resistance near a Fibonacci retracement level.  Colder than normal weather is forecast to cover most of the mid-west increasing heating demand ahead of the inventory withdrawal season. Inventories remain below the 5-year average range.  There are a few tropical disturbances, one in the Caribbean that has a 60% change of become a tropical depression and one off the coast of Cape Hateras North Carolina which has a 50% chance of becoming a cyclone.

Technical Analysis

Natural gas prices move higher on Tuesday rising 1.4%, but ran into resistance which is a 50% Fibonacci retracement level at 3.09.  A close above this level would lead to the next retracement level near 3.23. Support on natural gas is seen near the breakout level of 3.0. Momentum remains positive as the MACD (moving average convergence divergence) index recently generated a crossover buy signal. The MACD histogram is printing in the black with an upward sloping trajectory which points to higher prices.

Supply Rose Last Week

The EIA reported that the average total supply of natural gas rose by 1% compared with the previous report week. Dry natural gas production grew by 1% week on week, exceeding 83 Bcf per day for a second week in a row and averaging 83.9 Bcf per day. Average net imports from Canada increased by 11% from last week.

Demand is Rising

Demand increased, driven by consumption in the electric power sector. Total U.S. consumption of natural gas rose by 5% compared with the previous report week, according to the EIA Energy. Natural gas consumed for power generation climbed by 14% week over week. Industrial sector consumption decreased by 2% week over week. In the residential and commercial sectors, consumption declined by 12%. Natural gas exports to Mexico were the same as last week, averaging 4.7 Bcf per day.