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David Becker
Crude Oil daily chart, July 19, 2019

Natural gas prices continued to trade lower on Friday dropping 1.5%. This comes despite much warmer than expected temperatures in the north east that could push local prices much higher. US production is expected to continue to rise, and the Department of Energy pegs H2 natural gas prices near 2.50 per mmbtu based on current drilling estimates.

Technical Analysis

Natural gas prices continued to decline settling at a lower low. Resistance is seen near the 10-day moving average at 2.37. Support is seen near the July lows at 2.21. 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 below the MACD signal line (the 9-day moving average of the MACD line. Short term momentum remains negative as the fast stochastic slides lower. Prices are now oversold. The current reading of 12 is below the oversold trigger level of 20 which could foreshadow a correction.


The EIA Sees Production Rising

EIA forecasts that US dry natural gas production will average 91.3 billion cubic feet per day in 2019, up 8.0 Bcf per day from the previous record in 2018. EIA expects annual average US natural gas production will rise by 1.4 Bcf per day in 2020. EIA forecasts that Henry Hub natural gas spot prices will average $2.50 per million British thermal units in the second half of 2019 and $2.77 per MMBtu in 2020. EIA’s forecast for the second half of 2019 is 29 cents per MMBtu lower than forecast in the June STEO. The lower forecast reflects recent price declines and EIA’s updated assessment of U.S. drilling activity and average well productivity.

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