Natural Gas Price Prediction – Prices Drop on Soft Supply

Natural gas prices tumbled lower declining 1.85%, as demand declined, and volatility remain flat as Tropic storm Isaac, was downgraded to a Tropical depression.  According to NOAA, the weather is expected to be warmer than normal over the next 8-14 days, which could lift cooling demand.  The supply of natural gas was flat and continues to remain at elevated levels.

Technical Analysis

Prices dropped sharply on Friday, and tested support near an upward sloping trend line that comes in near 2.75.  Resistance on natural gas is seen near the 10-day moving average at 2.81.  Momentum has turned negative as the MACD (moving average convergence divergence) index generated a crossover buy 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.

Support of Natural Gas Was Flat in the United States

According to data from the EIA, supply of natural gas was flat this past week with the average total supply of natural gas remaining the same as in the previous report week, averaging 87.8 Bcf per day. Dry natural gas production increased 0.4% week over week, exceeding 83 Bcf per day for the first time on a weekly basis. Average net imports from Canada decreased by 11% from last week.

Demand is Down in the US

Overall demand is down despite increases in the residential and commercial sectors. Total U.S. consumption of natural gas fell by 1% compared with the previous report week, according to data from Energy Information Administration. Natural gas consumed for power generation declined by 8% week over week. Industrial sector consumption increased by 1% week over week. In the residential and commercial sectors, consumption increased by 26%. Natural gas exports to Mexico decreased 7%.