Natural Gas Price Prediction – Prices Slide Testing Support as Production Levels Ease

Natural gas prices moved lower on Tuesday, testing the recent contract lows. With production remaining elevated and demand continuing to remain subdued as the US economy reopens, prices continue to face downward pressure. US natural gas production hit a record in 2019, and while it is expected to decline in 2020, it should continue to outpace demand.

Technical Analysis

Natural gas prices fell to support as mild weather continue to provide little direction for market prices. Support is seen near the June lows at 1.84. Prices closed at an August contract low. Resistance is seen near the 10-day moving average at 1.90. Short-term momentum has turned negative as the fast stochastic recently generated a crossover sell signal. The current reading on the fast stochastic is 8, well below the oversold trigger level of 20 which could foreshadow a correction. Medium-term momentum is neutral as the MACD (moving average convergence divergence) histogram prints in the red with a flattening trajectory which reflects consolidation.

Natural Gas Production Surges in 2019

U.S. natural gas production set a record in 2019, averaging 92.2 Bcf/d. EIA forecasts dry natural gas production will average 89.7 Bcf per day in 2020, with monthly production falling from 96.2 Bcf per day in November 2019 to 83.6 Bcf/d in March 2021, before increasing slightly. In 2021, EIA’s forecast production of dry natural gas in the United States averages 85.4 Bcf per day. EIA expects production to begin rising in the second quarter of 2021 in response to higher prices.