Advertisement
Advertisement

Natural Gas Price Prediction – Prices Drop Through Support on Current Warm Weather

By:
David Becker
Published: Feb 4, 2019, 21:08 UTC

Natural gas prices tumble through support and target 2018 lows

Natural gas daily chart, February 01, 2019

Natural gas prices tumbled on Monday as warm weather covered most of the eastern United States. The warm weather will reduce heating days during the heart of the winter. The weather is expected to get colder, with most of the below normal temperatures in the western United States. The mid-west is expected to see colder than normal temperatures, but nothing like what occurred during the polar vortex. Natural gas inventories are expected to tumble this week according to estimize, and the 13-analysts who have made prediction as of Monday.  The current average decline is 230 Bcf, which would put inventories well below the 5-year average range.

Technical Analysis

Natural gas prices broke down and are poised to test target support near the 2018 lows at 2.55.  A break below the 2.50 level has no support in sight. This would lead to a test of the 2016 lows near 1.50. Resistance on natural gas is former support near prior support now resistance near 2.73. Medium term momentum is negative as the MACD (moving average convergence divergence) index line recently generated a crossover sell signal. The MACD histogram is printing in the red with a downward sloping trajectory which points to lower prices. The fast stochastic is oversold. Prices have dropped very quickly and the current reading of 1, is well below the oversold trigger level of 20, which could foreshadow a correction.

With stocks expected to draw by 230 Bcf, the rebound expected from the warm weather will only put prices well below the 5-year average range for this time of year. The EIA has reported that stocks were 14 Bcf less than last year at this time and 328 Bcf below the five-year average of 2,525 Bcf. At 2,197 Bcf, total working gas is within the five-year historical range.

Please let us know what you think in the comments below

About the Author

David Becker focuses his attention on various consulting and portfolio management activities at Fortuity LLC, where he currently provides oversight for a multimillion-dollar portfolio consisting of commodities, debt, equities, real estate, and more.

Did you find this article useful?

Advertisement