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Natural Gas Price Prediction – Prices Rise and Settle at Contract High

By:
David Becker
Published: Jul 12, 2021, 18:53 UTC

Warm weather is likely to percist

Natural Gas Price Prediction – Prices Rise and Settle at Contract High

Natural gas prices moved higher on Monday, rising 1.7% and forming a bull flag continuation pattern. The front-month August contract closed at an all-time high. According to a National Oceanic Atmospheric Administration (NOAA) report, the weather is expected to remain warmer than normal for the next 2-weeks.  There are no tropical storms expected to turn into tropical cyclones according to a NOAA forecast.

Technical Analysis

Natural gas prices closed at record highs for the August contract and is poised to test the July highs, which is resistance seen near 2.82. Support is seen near the 10-day moving average at 3.65. Short-term momentum has turned positive as the fast stochastic generated a crossover buy signal. Short-term prices action is overbought as the fast stochastic is printing a reading of 88, above the overbought trigger level of 80, foreshadowing a correction. The RSI is also in overbought territory, printing a reading of 72. Medium-term momentum is neutral as the MACD (moving average convergence divergence) histogram is printing near the zero-index level with a flat trajectory which points to consolidation.

Consumption is Expected to Decline

According to the EIA, U.S. natural gas consumption averaged 83.3 Bcf per day in 2020, down 2.2% from 2019. The agency expects  that natural gas consumption will decline by 1.1% in 2021 and grow by 0.7% in 2022. Most of the forecast decline in natural gas consumption this year results from less natural gas use in the electric power sector, which is related to demand destruction.

About the Author

David Becker focuses his attention on various consulting and portfolio management activities at Fortuity LLC, where he currently provides oversight for a multimillion-dollar portfolio consisting of commodities, debt, equities, real estate, and more.

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