Natural Gas Price Prediction – Prices Rebound but Remain Despressed

Natural gas prices edged higher consolidating its recent decline after hitting a contract low on Monday. Demand was flat in the latest week and despite a decline in the number of active rigs, prices continued to decline. The weather is expected to remain warmer than normal in the mid-west and east coast for the next 2-weeks driving up cooling demand. A weaker than expected GDPNow growth forecast could put additional downward pressure on prices.

Technical Analysis

Natural gas prices rebounded after breaking through trend line support on Monday. Prices made a new low for the August contract and are poised to test the June contract lows at 1.55. Resistance on natural gas is seen near the breakdown level at 1.92 and then the 10-day moving average at 1.95. Short term momentum has turned negative as the fast stochastic generated a crossover sell signal. The current reading on the fast stochastic is 14, well below the oversold trigger level of 20 which could foreshadow a correction. Medium-term momentum has turned negative as the MACD (moving average convergence divergence) histogram prints in the red with a downward sloping trajectory which points to lower prices.

Demand is Unchanged

Demand remains flat, according to the EIA. Total U.S. consumption of natural gas was unchanged from the previous report week, averaging 60.4 Bcf per day. Natural gas consumed for power generation climbed by 8.3% week over week as many parts of the country experienced seasonally warm temperatures. Industrial sector consumption decreased by 1.3% week over week. In the residential and commercial sectors, consumption declined by 15.6% following last week’s cooler weather.