Natural Gas Price Prediction – Prices Form Outside and Rally on Tropical Update

A tropical storm is heading to the Gulf of Mexico
David Becker
Natural gas daily chart, July 18, 2019

Natural gas prices rose on Monday as warmer than normal weather in the North east buoyed cooling demand. On Monday, the National Oceanic Atmospheric Administration reported the potential formation of a cyclone in the Caribbean Islands. The trajectory of the formation would take the cyclone into the Gulf of Mexico. As Monday afternoon EST, NOAA predicted a 60% chance of a tropical cyclone forming. The weather in the north east of the United States is expected to remain much warmer than normal over the next 6-10 and 8-14 days according to NOAA.

Technical Analysis

Natural gas prices generated an outside reversal day, making a higher high and a lower low and a higher close. This type of pattern generally comes at the end of a trend. Resistance on natural gas prices is seen near the 10-day moving average at 2.36. Support is seen near the July lows at 2.23. Short term momentum has turned positive as the fast stochastic generated a crossover buy signal in oversold terrotry. The current reading on the fast stochastic is 27, just above the oversold trigger level of 20. Medium term momentum is neutral as the MACD (moving average convergence divergence) histogram prints near the zero-index level with a flat trajectory which reflects consolidation.

The EIA Reports Lower Production

The Energy Information Administration reports that supply lower as production is taken offline. The EIA stated that the average total supply of natural gas fell by 2% compared with the previous report week. Dry natural gas production decreased by 2% compared with the previous report week as a result of the temporarily shut-in of over half of Gulf of Mexico production through this report week because of Hurricane Barry. Net imports from Canada remained the same as last week, averaging 5.3 Bcf per day according to figures from the EIA. Demand increased due to warmer than normal weather boosting power generation which reached an all-time record. Total US consumption of natural gas rose by 2% compared with the previous report week, according to data from the EIA. Natural gas consumed for power generation climbed by 6% week over week.

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