Natural Gas Price Prediction – Prices Rise, but Its a Dead Cat Bounce

Natural gas prices edged higher climbing by 1% as it attempted a dead cat bounce. Prices remain under pressure as warmer than expected weather is expected to cover most of the eastern portion of the United States. Demand during the last week was strong as the polar vortex moved down through the mid-west. Supply was also flat allowing for a huge draw in inventories. Current expectations are for a 230 Bcf draw according to estimize.

Technical Analysis

Natural gas prices moved higher but there was little follow through with the bounce and prices made a lower low and a lower high which defines a downtrend. Support is seen near the March 2018 lows at 2.55. Additional support is seen near the 2018 lows at 2.50. Momentum remains negative as the MACD (moving average convergence divergence) index recently generated a crossover sell signal. The MACD histogram is printing in the red with a downward sloping trajectory which points to lower prices. Prices are oversold. The fast stochastic is printing a reading of 4, below the oversold trigger level of 20 which could foreshadow a correction.

Demand Rose

Demand rises, driven by the residential and commercial sector. Total U.S. consumption of natural gas rose by 8% compared with the previous report week, according to the EIA. In the residential and commercial sectors, consumption increased by 11%, reaching a near-record high of 70.9 Bcf per day on Wednesday, January 30, the second-highest value ever recorded (the highest was 71.6 Bcf per day in January 2014). Natural gas consumed for power generation climbed by 6% week over week. Industrial sector consumption increased by 4% week over week. Natural gas exports to Mexico increased 3%averaging 4.9 Bcf/dreaching a record weekly high.

Supply remains flat. According to data from the EIA, the average total supply of natural gas remained the same as in the previous report week, averaging 94.0 Bcf per day. Dry natural gas production remained constant week over week. Average net imports from Canada increased by 7% from last week amid cold weather.

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