Natural Gas Price Prediction – Prices Tumble to 6-week Lows

Natural gas prices dropped again on Friday, closing at a 6-week low. Warmer than normal weather is reducing heating demand, which is eroding the demand for natural gas. The weather is expected to remain warmer than normal over the next 6-10 and 8-14 day forecast according to the National Oceanic Atmospheric Administration.

Technical Analysis

Natural gas prices tumbled on Friday, dropping 1.4%, and closing at a 6-week low. Prices made a fresh lower low, and are poised to test the February lows at 2.54. Resistance is seen near the 10-day moving average at 2.77. 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 negative momentum. The fast stochastic is also moving lower but the current reading of 1.3, is well below the oversold trigger level of 20 which could foreshadow a correction.

Supply is Rising

Supply rises with production growth. According to data from the Energy Information Administration, the average total supply of natural gas rose by 1% compared with the previous report week. Dry natural gas production grew by 1% compared with the previous report week. Average net imports from Canada decreased by 7% from last week.

Demand falls across all sectors. Total U.S. consumption of natural gas fell by 3% compared with the previous report week, according to data from the EIA. Natural gas consumed for power generation declined by 4% week over week. Industrial sector consumption decreased by 2% week over week. In the residential and commercial sectors, consumption declined by 2%. Natural gas exports to Mexico were the same as last week, averaging 4.6 Bcf per day.