Natural Gas Price Prediction – Prices Drop on Rise in Rig Count

Natural gas prices moved lower on Monday following news on Friday that the number of natural gas rigs rose in the latest week putting downward pressure on prices. The weather is expected to be slightly warmer than normal but not strong enough to drive up subdued demand. Meanwhile, demand picked up slightly due to better power generation.

Technical Analysis

Natural gas prices moved lower on Monday dropping 2.7%, and breaking through contract lows. Target support is seen near the continuation contract lows in May near 1.60. Resistance on natural gas prices is seen near the 10-day moving average at 1.87. Medium-term momentum has turned negative as the MACD (moving average convergence 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 above the MACD signal line (the 9-day moving average of the MACD line.

Demand Rise Driven by Power

Demand rises, driven by the power generation sector. Total U.S. consumption of natural gas rose by 3.1% compared with the previous report week, according to data from the EIA.  Natural gas consumed for power generation climbed by 8.7% week over week. Natural gas exports to Mexico increased 8.2% as Mexico’s economy began resuming activating following COVID-19-related shutdowns. Conversely, in the residential and commercial sectors, consumption declined by 6.4%. Industrial sector consumption decreased by 1.2% week over week.