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Natural Gas Price Prediction – Prices Slide on Small Rig Count Decline

By:
David Becker
Published: May 15, 2020, 19:09 UTC

Natural gas rigs dropped by one this week

Natural Gas Price Prediction – Prices Slide on Small Rig Count Decline

Natural gas prices moved lower on Friday after initially testing higher levels which was rejected. The whipsaw price action shows that trade will likely remain choppy. The EIA believes that production will decline in 2020, but the number of rigs did not fall as much as expected. The oil rig count according to Baker Hughes, showed another 34-rig decline to the count, but there was only 1-natural gas rig that was removed from operations. The weather is expected to be warmer than normal over most of the mid-west and the east coast for the next 6-10 and 8-14 days which should help buoy prices.

Technical Analysis

Natural gas made a higher high and a higher low, but by no means could one look at today’s price action as part of an uptrend. Prices broke down this week through trend line resistance and now appears to be forming a bear flag consolidation pattern which is a continuation pattern where there is a pause that refreshes lower. The 10-day moving average crossed below the 50-day moving average which means that a short-term downtrend is now in place. Prices are also oversold. The fast stochastic is printing a reading of 8, well below the oversold trigger level of 20 which could foreshadow a correction.

EIA See Less Production in 2020

The EIA reported in its Short-Term Energy Outlook US natural gas production will decrease by 5% in 2020 because of a weakening economic outlook from the impact of efforts to reduce the spread of the 2019 novel coronavirus disease. EIA expects natural gas production to average 94.3 billion cubic feet per day in 2020, down from 99.2 Bcf per day in 2019.

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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