Natural Gas Price Prediction – Prices Rally on Strong Spot Demand

Natural gas prices surged higher on Tuesday but settled off the highs of the trading session. The frigid weather in Texas and throughout the midwest has generated an enormous demand for natural gas for heating and electricity. Prices in some areas of Oklahoma saw natural gas prices surge to $600 per mmbtu. Spot prices are likely to remain volatile over the next few days as many facilities had to close and cannot produce natural gas. The EIA expects total natural gas consumption to be down by 1.9% year over year in the coming year.

Technical Analysis

Natural gas prices rose sharply, climbing 7%, but closing off the lows of the session. Resistance is seen near the October highs near 3.32. Support is seen near the former breakout level near 3.04 and then the 10-day moving average at 2.90. Short-term support has turned positive as the fast stochastic generated a crossover buy signal. Prices are overbought. The current reading on the fast stochastic is 87, above the overbought trigger level of 80. The RSI (relative strength index) broke higher and is accelerating which points to higher prices. Medium-term momentum is positive as the MACD (moving average convergence divergence) histogram is printing in positive territory with an upward sloping trajectory which points to higher prices.

US Consumption Will Decline in 2021

The EIA expects that total U.S. consumption of natural gas will average 81.7 billion cubic feet per day in 2021, down 1.9% from 2020. The decline in total U.S. consumption reflects less natural gas consumed for electric power as a result of higher natural gas prices compared with last year. In 2021, EIA expects residential natural gas demand to average 12.9 Bcf/d and commercial demand to average 9.1 Bcf/d.