Natural Gas Price Prediction – Prices Whipsaw, as Short Term Momentum Turns Negative

Short squeeze on gas pushes prices to a fresh 3-month intra-day high
David Becker
Natural gas daily chart, September 09, 2019

Natural gas prices consolidated on Tuesday hitting a fresh 3-month high before profit-taking weighed on prices. A chain of storms is making there way across the Atlantic, which should continue to bring on natural gas volatility. The rise in prices is a function of short positions getting squeezed. The volume of managed money that is short futures and options far outnumbers the volume that is long, which is likely to lead to additional buying. Traders await Thursday’s inventory report from the Department of Energy. Expectations are for an 85 Bcf draw according to Estimize. The weather is expected to be warmer than normal over the next 8-14 days which should increase natural gas cooling demand.

Technical Analysis

Natural gas prices consolidated on Tuesday after making a higher high as short-covering continued. Prices are now poised to test target resistance near the May lows at 2.60 and then the May highs at 2.77. Support for natural gas is seen near the 10-day moving average at 2.39. Momentum is positive as the MACD (moving average convergence divergence) histogram is printing in the black with an upward sloping trajectory which points to higher prices. The fast stochastic has turned lower and made a crossover in overbought territory. Its currently printing a reading of 87, well above the overbought trigger level of 80 which could foreshadow a correction.

Demand To Mexico Could Increase

The EIA expects exports to Mexico to increase as new pipeline enters service. EIA expects flows to Mexico to increase in coming months after Mexico’s utility Commission Federal de Electricidad announced last week that it had renegotiated contracts with three pipeline companies. According to the EIA, the first pipeline to begin operations, the 2.6 Bcf per day Sur de Texas pipeline, posted flows of 50 MMcf per day on Tuesday, September 3.

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