Natural Gas Price Prediction – Prices Drop in Sympathy with Crude, Could Test 2016 Lows

Natural gas prices moved lower on Friday following Thursday’s lighter than expected draw in natural gas inventories. Gas prices are facing headwinds as economic growth globally is likely to decelerate. Despite a stronger than expected jobs report, released by the Labor Department on Friday, riskier assets sold off, as coronavirus fears continued to stoke a market selloff. Warmer than normal weather is expected to cover most of the United States for the next 6-10 and 8-14 days, according to the most recent report from the National Oceanic Atmospheric Administration. Production continues to rise according to a recent report from the Energy Information Administration (EIA)

Technical Analysis

Natural gas prices dropped more than 3% in tandem with oil prices. Prices were unable to push through resistance near the 10-day moving average at 1.78. Support is seen near the February lows at 1,64. The 2016 lows are a key level at 1.61. The next level of target resistance is a downtrend channel that comes in near 1.43.

Medium-term momentum has turned negative as the MACD (moving average converge divergence) index 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 also generated a crossover sell signal, slicing through the zero-index level and has a negative trajectory that points to lower prices.

The EIA Reports a Rise in Production

While this is in the read view mirror, the EIA reports that in December 2019, dry natural gas production increased year to year for the month, for the 32^nd consecutive month. The preliminary level for dry natural gas production in December 2019 was 2,977 billion cubic feet which was 8.2% higher than the December 2018 level.