Natural Gas Price Prediction – Prices Surge by 17.5% as Short Get Squeezed Out

Natural gas prices surged higher on Wednesday as it was clear there was substantial short covering pushing prices higher. Volatility in the natural gas market also surged higher.  Rumors are that there were several hedge funds who where short natural gas versus long oil and where squeezed out of their positions. The colder than normal weather initially got prices moving, but the sharp rise of more than 49% so far on November, has to be a function of short-covering. Natural gas production increased year over year in August according to the Energy Information administration. The EIA will also release its inventory report on Thursday. Expectations are for a 39 Bcf rise according to estimize.

Technical Analysis

Natural gas prices surged higher on Wednesday rising 17.5%, which is the largest one day move in more  than 10-years. The weekly rise of 29% has to be one of the largest 3-day climbs on record.  Price surged but are clearly very overbought. The current reading of the RSI (relative strength index) is 86, well above the overbought trigger level of 70. The next level of target resistance on natural gas is the 2014 highs of 6.49. Support is seen near the $4 level which is the 2017 highs on natural gas. Momentum is positive as the MACD (moving average convergence divergence) histogram is printing in the black with an upward sloping trajectory which points to high prices.

The EIA Reports Higher Production

The EIA reports that in August 2018, for the 16th consecutive month, dry natural gas production increased year to year for the same month a year ago. The preliminary level for dry natural gas production in August 2018 was 2,640 billion cubic feet or 85.2 Bcf per day. This level was 10.5 Bcf per day higher than the August 2017 level of 74.7 Bcf per day. The average daily rate of dry natural gas production for August was the highest for any month since EIA began tracking monthly dry natural gas production in 1973.