Natural Gas Price Prediction – Prices Rally Breaking Out as Momentum Turns Positive

Natural gas prices continued to break out rising nearly 2% on Monday. Strong LNG demand is helping to buoy prices. Inventories also ended May nearly 3% lower than the 5-year average range. The weather is expected to remain normal except for the west which is expected to experience warmer than normal weather. The tropical season off and running with two storms in the Atlantic and one in the Gulf. The depression off of the East-coast of the U.S. should not impact natural gas structures. The Gulf storm has a 20% chance of becoming a tropical cyclone in the next 48-hours.

Technical Analysis

Natural gas prices broke out and continued to rally on Monday. Target resistance is seen near the October 2020 highs at 3.39. Support is seen near the 10-day moving average at 3.14. Short-term momentum is moving higher as the fast stochastic generated a crossover buy signal. Medium-term momentum has turned positive as the MACD (moving average convergence divergence) index generated a crossover buy signal. This occurs when the MACD line (the 12-day moving average minus the 26-day moving average) crosses above the MACD signal line (the 9-day moving average of the MACD line).

Inventories Declined in May

The EIA estimates that natural gas inventories ended May 2021 at almost 2.4 trillion cubic feet which is 3% lower than the five-year average. More natural gas was withdrawn from storage during the winter of 2020–21 than the previous five-year average, largely as a result of the colder-than-average February temperatures that contributed to a drop in natural gas production.