Natural Gas Price Prediction – Prices Rise as Production is Expected to Fall

Natural gas prices surged mid-day on Monday, despite warmer than normal weather that is forecasted to cover most of the United States for the next 6-10 and 8-14 days. Production is expected to rise for the 2019 year by 10% year over year according to the most recent short term energy outlook for the Energy Information Administration (EIA). But production in 202 is expected to fall year over year. Hedge funds continue to add to short positions in futures and options according to the most commitment of trader’s report released for the date ending December 10, 2019.

Technicals

Prices surged 2.7% mid-day and have filled a gap that was created when prices tumbled in early December. Support is seen near the 10-day moving average at 2.33. Resistance on natural gas prices is seen near the breakdown level near 2.57, and then the 50-day moving average at 2.59. Medium-term momentum has turned positive as the MACD (moving average convergence divergence) index generated a crossover buy signal 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). The MACD histogram is printing in the black with an upward sloping trajectory which points to higher prices. Short term momentum is also positive as the fast stochastic generated a crossover buy signal. The fast stochastic is moving higher pointing to accelerate positive momentum.

Production is Forecast to Rise

EIA forecasts that annual dry natural gas production will average 92.1 billion cubic feet per day in 2019, up 10% from 2018. EIA expects that natural gas production will grow much less in 2020 because of the lag between changes in price and changes in future drilling activity. Low prices in the third quarter of 2019 will reduce natural gas-directed drilling in the first half of 2020. EIA forecasts natural gas production in 2020 will average 95.1 Bcf per day.