Natural Gas Price Prediction – Prices Rally Ahead Lead by Supply Disruption Concerns

Storms continue to generate volatility
David Becker
WTI and Brent Crude Oil

Natural gas prices moved higher on Friday as traders await a line of storms that are brewing in the Atlantic. There is now one named tropical depression and two storms that have a low chance of becoming a tropical cyclone in the next 48-hours.  In addition, the weather is expected to remain warmer than normal for the next 2-weeks according to the National Oceanic Atmospheric Administration, which should help buoy cooling demand. Inventories rose less than expected on Thursday according to a report from the EIA

Technical Analysis

Natural gas rallied more than 1.7% on Friday. Short-term support is seen near the 10-day moving average at 2.46. Resistance is seen near a downward sloping trend line at 2.64. Support is seen near the 10-day moving average at 2.49. Short term momentum is positive as the fast stochastic generated a crossover buy signal. The current reading on the fast stochastic is 92, above the overbought trigger level of 80. Medium-term momentum is also positive to neutral as the MACD (moving average convergence divergence) histogram is printing in the black with a flat trajectory which points to consolidation.

Demand Rises and Supply is Flat

The EIA reported that production of natural gas is unchanged week over week. The average total supply of natural gas remained the same as in the previous report week, averaging 96.5 Bcf per day. Dry natural gas production remained constant week over week. Average net imports from Canada increased by 7% from last week as exports to Canada on the Vector pipeline decreased week-on-week by 30%, dropping from a weekly average of 1.1 Bcf per day to 0.8 Bcf per day. Demand rises in line with expectations. Total US consumption of natural gas rose by 2% compared with the previous report week, according to data from IHS Markit. Natural gas consumed for power generation climbed by 3% week over week. Industrial sector consumption stayed constant, averaging 21.5 Bcf per day. In the residential and commercial sectors, consumption also remained at last week’s level, averaging 8.9 Bcf per day. Natural gas exports to Mexico decreased 1%.

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