Natural Gas Price Prediction – Prices Whipsaw and Settle on their Lows

Natural gas prices whipsawed moving higher initially and closing on the lows of the day. Natural gas prices closed at a fresh 3-year low. Prices were weighed on by a forecast from the National Oceanic Atmospheric Administration which reports that the weather will be warmer than normal for the next 6-10 and 8-14 days. Demand rose in the latest week driven by space heating.

Technical Analysis

Natural gas prices ran into short term resistance that was created by a gap last week and three tests of that level which is slightly lower than the 10-day moving average which is also resistance near 2. Support on natural gas is seen near the January lows at 1.83. A breakthrough this level would lead to a test of the 2016 lows at 1.61. Prices are oversold. The relative strength index (RSI) is printing a reading of 27, below the oversold trigger level of 30 which could foreshadow a correction. Short term momentum is negative to neutral. The fast stochastic generated a crossover sell signal in oversold territory. The current reading of 14, is below the oversold trigger level of 20 which could foreshadow a correction.

Demand Rises Driven by Space Heating

Total US consumption of natural gas rose by 17% compared with the previous report week, according to data from the EIA. In the residential and commercial sectors, consumption increased by 27%, driven by increased heating needs during the first half of the report week. Natural gas consumed for power generation climbed by 15% week over week as demand rose for electricity used in space heating. Industrial sector consumption increased by 3% week over week. Natural gas exports to Mexico decreased 7% with maintenance on the Sur de Texas–Tuxpan pipeline.