Natural Gas Price Prediction – Prices Tumble on Warm Weather Forecast

Natural gas prices tumbled more than 5% on Monday as warmer than normal weather is expected to cover most of the east coast for the next 6-10 and 8-14 days. The warm weather is expected to reduce natural gas demand, which should turn the trajectory of inventory draws upward. Hedge funds bought back some of their short positions in futures and options but remain short to the tune of 3 contracts short for every 1-contract long.

Technicals

Natural gas prices dropped sharply on Monday closing at the lowest levels seen since August. Support is seen near the December lows at 2.15 and then again at a weekly upward sloping trend line that comes in near 2.05. Short-term resistance near the 10-day moving average at 2.29.  Short term momentum has turned negative as the fast stochastic generated a crossover sell signal in the middle of the neutral range. Medium term momentum has also turned negative as the MACD (moving average convergence divergence) index generated a crossover sell signal. This occur 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.

Demand Rose in the Latest Week

Demand rose driven by power generation and buildings sectors, according to the EIA. Total U.S. consumption of natural gas rose by 7% compared with the previous report week. Natural gas consumed for power generation climbed by 7% week over week. Industrial sector consumption increased by 5% week over week. In the residential and commercial sectors, consumption increased by 7%. Natural gas exports to Mexico were the same as last week, averaging 5.3 Bcf per day