Natural Gas Price Prediction – Prices Slip on Lower Demand

Momentum has turned negative as bear flag is generated
David Becker
Natural Gas

Natural gas prices moved lower on Tuesday, as warmer than normal weather is expected to cover most of the United States for the next 2-weeks. The warm weather at the tail end of the withdrawal season is putting downward pressure on prices. Inventory levels are expected to decline by 53 Bcf this week according to estimize. This follows a 47 bcf decline last week.

Technical Analysis

Natural gas prices moved lower on Tuesday ahead of Thursday inventory report. Prices are forming a bear flag pattern which is a pause that refreshes lower. Resistance is seen near the 10-day moving average at 2.81. Support is seen near the February lows at 2.54. Momentum has turned negative as the MACD (moving average convergence divergence) index generated a crossover sell signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses below the MACD signal line (the 9-day moving average of the MACD line). The MACD histogram is printing in the red with a downward sloping trajectory which points to lower prices and accelerating positive momentum. The fast stochastic is also continuing to decline which reflects accelerating negative momentum. The current reading of 13, is well below the oversold trigger level of 20 which could foreshadow a correction.

Demand Declined in the Latest Week

Overall demand decreases, driven by decreased natural gas consumption in the residential and commercial sectors according to the Energy Information Administration. Total U.S. consumption of natural gas fell by 8% compared with the previous report week. In the residential and commercial sectors, consumption declined by 17% as a result of warmer–than-normal temperatures in the population centers of California and the Northeast. Natural gas consumed for power generation was flat, averaging 22.5 Bcf per day. Industrial sector consumption decreased by 1% week over week.

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