Natural Gas Price Prediction – Prices Rebound More than 7% as Momentum Turns Positive

Natural gas prices rebounded sharply on Tuesday testing resistance level. There is a theory that the decline in oil prices will lead to a reduction in oil rigs, which should reduce drilling capacity for natural gas. Production in 2019 grew by 9.8 billion cubic feet to a record, which has put significant downward pressure on prices. The weather is expected to remain warmer than normal on the east coast for the next 6-10 and 8-14 days which could generate headwinds for natural gas prices.

Technical Analysis

Natural gas prices rallied more than 7% on Tuesday, testing resistance near a downward sloping trend line that comes in near 1.94.  A break of this level would lead to a test of the February highs at 2.02. Medium-term momentum has turned positive as the MACD (moving average convergence divergence) index generated a crossover buy signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses above the MACD signal line (the 9-day moving average of the MACD line). Short term momentum has also turned positive as the fast stochastic generated a crossover buy signal and accelerated higher.

Production Continues Rising

There is the chance that a decline in drilling rig activity in the petroleum sector will spill over into natural gas production. The EIA reports that US natural gas production grew by 9.8 billion cubic feet per day (in 2019, a 10% increase from 2018. Natural gas production measured as gross withdrawals averaged 111.5 Bcf per day in 2019, the highest volume on record.