Natural Gas Price Prediction – Prices Rebound Despite Warm Weather

Natural gas prices rebounded on Monday as riskier assets gained traction and fears over the coronavirus abated. Hedge funds continued to reduce both long and short positions in futures and options, as prices hit their 2016 lows. The question now is whether the warm weather will continue to push natural gas prices in the spring below the 1.61 level. Demand in the US fell in the latest week because of warmer than normal temperatures.

Technical Analysis

Natural gas prices rebounded on Monday as riskier assets gained traction. The worse than expected Chinese PMI data confirmed what the market already new. Economic expansion in China will be difficult to come by over until the coronavirus is contained. Prices rebounded by 4% and are poised to test resistance near the 1.80 level and then the 10-day moving average at 1.85.

Short term momentum has turned positive as the fast stochastic generated a crossover buy signal. The crossover occurred while the fast stochastic is printing a reading of 18, and has moved up to the 28 level which reflects accelerating positive momentum. Medium-term momentum is negative but is turning neutral. The MACD histogram is starting to decelerating reflecting decelerating negative momentum.

Demand Drops

Demand falls with warm temperatures in key demand centers. Total US consumption of natural gas fell by 4% compared with the previous report week, according to data from the EIA. Natural gas consumed for power generation declined by 3% week over week. Industrial sector consumption increased by 2% week over week. In the residential and commercial sectors, consumption declined by 8%. Natural gas exports to Mexico were the same as last week, averaging 5.4 Bcf per day.