Natural Gas Price Prediction – Prices Surge as Hurricane Michael Slips Into the Gulf of Mexico

 

Natural gas prices surged higher on Monday rising 3.7% as Hurricane Michael made its way into the Gulf of Mexico.  While Michael is expected to make landfall on Wednesday in Alabama or Florida, there is concern by producers that it might shift west hitting some of the production areas near the Louisiana coast.  Approximately 230 million cubit feed of natural gas was shut in when Tropical Storm Gordon made its way into the Gulf in September. Hurricane and tropical storm activity is picking up with another 2-storms moving off the coast of Africa with am better than 50% chance of becoming cyclones.  The weather over the next 6-10 days is expected to be colder than normal in the mid-west, but that is expected to change to normal over the next 8-14 days. Hedge funds added to long position in futures and options and reduced short according to the latest industry report.

Technical Analysis

Natural gas prices broke out above trend line resistance and are poised to test the 2018 highs at 3.66. Support is seen near the 10-day moving average at 3.12. Momentum on natural gas prices remain positive as the MACD (moving average convergence divergence) histogram prints in the black with an upward sloping trajectory which points to higher prices.

Hedge Funds Add to Long positions

Hedge funds added to long position in futures and options and reduced short position according to the latest commitment of trader’s report released for the date ending October 2, 2018. According to the CFTC, managed money increase long position in futures and options by 31.5K contracts while reducing short position in futures and options by 36.4K. Hedge funds are betting on higher prices. The next long position increased to 213K long, which is comprised of 288k long and 75K short.

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 89.3 billion cubic feet per day. Dry natural gas production remained constant week over week. Average net imports from Canada increased by 5% from last week.