Natural Gas Price Prediction – Prices Tumbled on Warm Weather Forecast

Natural gas prices tumbled on Monday, dropping 7% as warmer than normal weather is expected to cover most of the United States for the next 2-weeks. Warmer weather reducing heating demand, and traders are speculating that prices will decline. This comes despite lower than average inventory levels which are well below the 5-year average range.

Technical Analysis

Natural gas prices tumbled on Monday, slicing through support which was former resistance at 3.66.  The next target is an upward sloping trend line that connects the lows in September to the lows in October and comes in near 3.48. Momentum remains negative as the MACD (moving average convergence divergence) histogram prints in the red with a downward sloping trajectory which points to lower prices for natural gas. Natural gas is also oversold, as the fast stochastic is printing a reading of 3, well below the oversold trigger level of 20 which could foreshadow a correction.

Natural Gas Production is Flat

Supply remains unchanged as imports from Canada made up for production declines. According to data from the EIA, the average total supply of natural gas remained the same as in the previous report week, averaging 92.6 Bcf per day. Dry natural gas production decreased by 1% this report week from 88.6 Bcf per day last report week. Average net imports from Canada increased by 27%, or 1 Bcf per day from 3.7 Bcf per day, last week. Daily volumes from Enbridge’s Westcoast pipeline, which provides natural gas to northwestern United States, have risen following the explosion in October.

Demand is Rising

Total U.S. consumption of natural gas rose by 15% compared with the previous report week, according to data from the EIA. Natural gas consumed for power generation climbed by 9% week over week. Industrial sector consumption increased by 4% week over week. In the residential and commercial sectors, consumption increased by 26%. Natural gas exports to Mexico increased 2%.