Natural Gas Price Prediction – Prices Surge on Cold Weather Forecast

Natural gas prices surged higher closing up 3%, after testing the 3.9 handle earlier in the trading session. Colder than normal weather is expected to cover most of the United States for the next 6-10 days but then ease and turn warmer during the latter part of November. Inventories remain well below the 5-year average range which could continue to put upward pressure on prices. Demand is flat but expected to rise next week as supply dipped by approximately 1%.

Technical Analysis

Natural gas prices broke out and tested the $3.9 level piercing through the prior 2018 highs at 3.66. Support is seen at this level and resistance is seen near the 2017 highs at $4.0 per mmbtu.  Prices made a higher high and a higher low which is a sign of an uptrend. Positive momentum re-accelerated as the MACD (moving average convergence divergence) histogram is printing in the black with an upward sloping trajectory which points to higher prices. The relative strength index (RSI) moved higher with price action which reflects accelerating positive momentum. The current reading on the RSI is 77, which is above the overbought trigger level and could foreshadow a correction.

Supply decreases as Canadian imports decline

According to the EIA, the average total supply of natural gas fell by 1% to 91.1 Bcf/d compared with the previous report week. Dry natural gas production remained constant week over week. Average net imports from Canada decreased by 11% from last week. Demand remains flat. Total U.S. consumption of natural gas was unchanged from the previous report week, averaging 67.9 Bcf per day according to data from the EIA. Natural gas consumed for power generation declined by 5% week over week. Industrial sector consumption stayed constant, averaging 22.5 Bcf per day. In the residential and commercial sectors, consumption increased by 6%. Natural gas exports to Mexico decreased 1%.