Natural Gas Price Prediction – Prices Rebound from Oversold Condition

Natural gas prices rebounded sharply on Tuesday, breaking a three-day string of consecutive losing trading sessions. The weather is expected to be warmer than normal throughout the mid-West over the next 6-10 days but then turning milder throughout most of the West Coast and the mid-West. There are no significant tropical disturbances in the Atlantic that are treating to become a tropical cyclone over the next 48-hours. According to the EIA, both consumption and production of natural gas declined in 2020.

Technical Analysis

Natural gas finally rebounded after dropping more than 10% in the last two days of last week. Prices tested support near the 50-day moving average at 5.20. Resistance is seen near the 10-day moving average at 5.55. Short-term momentum reversed and turned positive as the fast stochastic generated a crossover buy signal. Medium-term momentum has turned negative as the MACD (moving average convergence divergence) index generated a crossover sell signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses below the MACD signal line (the 9-day moving average of the MACD line).

Consumption and Production Declined in 2020

U.S. natural gas production and consumption decreased in 2020 because of mild winter weather and the COVID-19 pandemic’s effect on demand. According to the EIA, less natural gas was consumed in the United States, which pushed prices down; the annual Henry Hub spot price for 2020 averaged $2.03 per million British thermal units  the lowest annual price since 1997. The low prices contributed to record-high levels of natural gas exports and consumption in the electric power sector in 2020.