Natural Gas Price Prediction – Prices Rebound but Remain Rangebound

Natural gas prices rose nearly 4%, ahead of Wednesday’s June contract expiration. This comes as demand declines in the latest week driven by soft commercial heating demand. Hedge funds added to long position in futures and options according to the CFTC. The increase was approximately 16K contracts, while nothing was added to short positions. Currently the open interest shows that managed money is 16K longer futures and options. The open interest is 216K long versus 200K short. The weather is expected to be cooler than normal on the east coast which is likely to reduce cooling demand.

Technical Analysis

Natural gas prices moved higher on Tuesday, ahead of Wednesday change of the prompt contract to July. Support is near the 10-day moving average at 1.73. Target support on natural gas is seen near the May lows at 1.60. Resistance is seen near the 50-day moving average seen near 1.84. Short-term momentum has turned positive as the fast stochastic generated a crossover buy signal. This followed a recent sell signal which is likely a sign of consolidation. Medium-term momentum is negative to neutral as the MACD (moving average convergence divergence) histogram is printing in the red with a flat trajectory that points to consolidation.

Demand  is Down

Demand falls, driven by low heating demand in buildings. Total U.S. consumption of natural gas fell by 10.0% compared with the previous report week, according to the EIA. Gains in the electric power sector were more than offset by low demand for heating in buildings because of seasonal spring temperatures. In the residential and commercial sectors, consumption declined by 40.8% after a cold snap last week that increased heating demand. Industrial sector consumption decreased by 3.8% week over week. Natural gas consumed for power generation climbed by 11.3% week over week. Natural gas exports to Mexico increased 2.5%.