Natural Gas Price Prediction – Prices Whipsaw But Hold Support

Natural gas prices moved higher after testing lower levels, as prices appear to be holding support. Warmer than normal weather is forecast to cover most of the United States over the next 2-weeks according to the latest forecast from NOAA. Warmer than normal weather will essentially reduce heating demand and weigh on natural gas prices.

Technical Analysis of Natural Gas

Natural gas prices rebounded at support near the September 2018 lows at 2.96.  This also coincided with the December 2017 lows. Resistance on natural gas prices is seen near the 10-day moving average at 3.43. Short-term momentum is turning positive as the fast stochastic generated a crossover buy signal in  oversold territory. The current reading on the fast stochastic is 4, well below the oversold trigger level of 20 and could foreshadow a correction. Momentum as reflected by the MACD (moving average convergence divergence) histogram is negative as the histogram prints in the red with a downward sloping trajectory which points to lower prices.

Supply of Natural Gas Continues to Ease

According to the IEA supply fell in the latest week by 1% compared with the previous report week. Dry natural gas production remained constant week over week. Average net imports from Canada decreased by 3% from last week.

Demand Falls on Warmer than Normal Weather

The EIA also reports that demand is declining driven by a drop in residential and commercial consumption. Total U.S. consumption of natural gas fell by 16% compared with the previous report week. The largest decrease in consumption came in the residential and commercial sectors, where natural gas use declined by 25% with warmer-than-normal weather across the Lower 48 states. Natural gas consumed for power generation declined by 11% week over week. Industrial sector consumption decreased by 3% week over week. Natural gas exports to Mexico decreased 2%. Declining demand during the withdrawal season is putting downward pressure on prices.