Natural Gas Price Prediction – Prices Rise as Storms Brew

David Becker
Natural gas daily chart, September 11, 2018

Natural gas prices increased for a second consecutive trading session rising nearly 1% after rebounding from trend line support.  While Hurricane Florence is getting all the headwinds, there is a cyclone forming in the gulf that could put infrastructure at risk.  Hurricane Isaac is also moving toward the Caribbean which could lead to another hurricane making its way into the Gulf of Mexico.

Technical Analysis

Natural gas price moved higher on Tuesday rising for the second consecutive trading session after bounding near support which is an upward sloping trend line near 2.76.  Resistance is seen near the 10-day moving average at 2.85. A close above this level, as hurricane activity increases volatility could push prices up to the 3.00 August highs. The trend is downward sloping as the 10-day moving average crossed below the 50-day moving average. Momentum is neutral as the MACD (moving average convergence divergence) histogram prints in the red with a flat trajectory which points to higher prices.

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Hurricane Activity

Most of the US infrastructure is located in the Gulf of Mexico. The National Oceanic Atmospheric Administration reports that there is a disturbance which has a 50% chance of forming a cyclone which could threaten Gulf of Mexico infrastructure. Hurricane Florence is unlikely to generate volatility in the natural gas space, but it is causing some price spikes in gasoline prices.

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Demand for gasoline will increase as consumers quickly scramble to get gasoline to escape the storms path. There will be more of a focus on Hurricane Isaac which is making its way through the southern Atlantic and headed for the Caribbean see. Traders now await inventory information from the Department of Energy on Thursday. The markets expect an increase of 65 Bcf according to Estimize.  Inventories remain below the 5-year average range, and will need to increase rapidly to move near the 5-year average range before the withdrawal season.

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