Natural Gas Price Prediction – Prices Drop as Short Positions Rise over the Latest Week

Natural gas prices dropped on Monday falling more than 2.2%, as normal weather is unlikely to generate reasonable natural gas demand. The weather is expected to be normal over the next 8-14 days which should reduce any cooling or heating demand. There are 2-disturbance in the Gulf of Mexico that NOAA gives a 10% chance of becoming a tropical storm over the next 48-hours. There are a total of 3-storms when you count a tropical depression in the Atlantic. Natural gas traders added to short positions and reduced long positions in futures and options according to the latest Commitment of Trader’s report.

Technical Analysis

Natural gas prices eased 2.25% on Monday following a rally that failed on Friday. Resistance near the 10-day moving average at 2.37. Support on natural gas is seen near the October lows at 2.21. Short term momentum has whipsawed turning negative after turning positive on Friday. The fast stochastic has now moved out of oversold territory which points to accelerating positive momentum. Medium-term negative momentum is decelerating as the MACD (moving average convergence divergence) histogram is printing in the red with a flattening trajectory which points to consolidation.

Hedge Funds Add to Short Position

According to the latest commitment of Trader’s report released for the date ending October 1, 2019, hedge funds reduced long positions in futures and options while increasing short position in futures and options. The aggregate number of long futures and options was reduced by 20K contracts while shorts were increased by 23K contracts. The total number of long positions in futures and options is now 113K compared to short position of 232. This nearly double open interest of short position in futures and options leaves natural gas prices subject to a short-squeeze.