Natural Gas Price Prediction – Prices Whipsaw as Cold Weather and Low Inventories Buoy Prices

Natural gas prices moved lower on Friday but continued to remain in a wide range, following Thursday’s inventory report which showed a smaller draw than expected. The weather is expected to be colder than normal over the next 6-10 days, but the climate is expected to moderate which is reflected in the 8-14-day forecast. Support from production in conjunction with imports from Canada rose in the last week climbing by nearly 1%. Demand from residential use, industrial use and electrical use basically remain flat from the prior week.  Inventories remain below the 5-year average range, while prices are still 50% below the 5-year highs.

Technical Analysis

Natural gas prices whipsawed on Friday, making a higher high and a higher low and holding just above support near the 10-day moving average at 4.46. Additional support is seen near this weeks low at 43.99.  Resistance is seen near the November highs at 4.92. Short term momentum is neutral to negative as the fast stochastic generated a crossover sell signal near the top end of the neutral range. The MACD (moving average convergence divergence) histogram is printing in the black with a flat trajectory which reflects consolidation.

Supply Increased Slightly

Supply increases slightly as both production and net Canadian imports rise, according to the EIA. Total supply of natural gas rose by 1%, averaging 92.9 Bcf per day, compared with the previous report week. Dry natural gas production grew by 1%, averaging 88.5 Bcf per day, and average net imports from Canada increased by 1% from last week.

Demand was Flat

The EIA reports that total U.S. consumption of natural gas was unchanged from the previous report week, averaging 84.2 Bcf per day. Natural gas consumed for power generation declined by 4% week over week. Industrial sector consumption stayed constant, and consumption in the residential and commercial sectors increased by 4%. Natural gas exports to Mexico decreased 1%.