Natural Gas Price Prediction – Prices Drop to 3-year Low

Natural gas prices hit a fresh closing low in Friday, following Thursday’s larger than expected build in natural gas inventories. Natural gas supply increased during the latest week but that was offset by rising demand. The weather is expected to be cooler than normal in the east coast and mid-west over the next 8-14 days which should reduce cooling demand during the heart of the summer. There is currently one disturbance in the Atlantic that has a 20% chance of becoming a tropical cyclone.

Technical analysis

Natural gas prices tumbled to fresh lows and closed at a 3-year low. Resistance is seen near the 10-day moving average at 2.21.  Support is seen near the 2016 lows at 1.62. Short term momentum has reversed and turned negative as the fast stochastic recently generated a crossover sell signal. The current reading on the fast stochastic is 13, which is below the oversold trigger level of 20 and could foreshadow a correction. Medium term momentum is negative to neutral as the MACD (moving average convergence divergence) histogram prints in the red with a flat trajectory which points to consolidation.

Supply and Demand Rise

Supply rises as dry production grows according to the EIA. The average total supply of natural gas rose by 1% compared with the previous report week. Dry natural gas production grew by 1% compared with the previous report week. Average net imports from Canada decreased by 1% from last week. Demand rises and total US consumption of natural gas rose by 1% compared with the previous report week, according to data from the EIA. Natural gas consumed for power generation declined by 1% week over week. Industrial sector consumption increased by 4% week over week. In the residential and commercial sectors, consumption increased by 1%. Natural gas exports to Mexico increased 1%.