Natural Gas Price Prediction – Prices Hit Fresh 2-month Highs

 

Natural gas prices hit fresh 2-year highs, as warmer than normal weather is expected to cover most of the east coast and mid-west of the United States raising the specter of higher cooling demand.  The weather during the later portion of the summer can be very unpredictable, and occasionally can have cool temperatures reduce cooling demand. There is currently no tropical activity in the Atlantic or Gulf of Mexico which would generate any concern.  Supplies in the US remain flat which demand last week was slightly lower.

Technical Analysis

Natural gas prices are edging higher, hitting a fresh 2-month high, and poised to test target resistance near the June highs at 3.05. Support is seen near the 10-day moving average at 2.95.  Momentum is positive as the MACD (moving average convergence divergence) histogram prints in the black with an upward sloping trajectory which points to higher prices. The RSI (relative strength index) broke out hitting new 2-month highs which reflects accelerating positive momentum.  The current reading on the RSI is 65, just below the overbought trigger level of 70.

Supply is Flat

Total supply remains flat as dry production increases. According to data from the EIA, the average total supply of natural gas remained the same as in the previous report week, averaging 87.3 Bcf per day. Dry natural gas production grew by 1% compared with the previous report week. Average net imports from Canada decreased by 6% from last week.

Demand Drops

Total U.S. consumption of natural gas fell by 3% compared with the previous report week, according to data from the EIA. Natural gas consumed for power generation declined by 4% week over week as average temperatures along the Gulf Coast and southern border fell. Industrial sector consumption stayed constant, averaging 19.7 Bcf per day. In the residential and commercial sectors, consumption declined by 1%. Natural gas exports to Mexico decreased 3%.