Natural Gas Price Prediction – Prices Bounce Friday, but Tumble 8% for the Week

Natural gas prices tumbled this week, droppiong 8.2%, as warm weather and declining demand weighed on prices. A higher than expected inventory estimate by the Department of Energy showed that storage grew more than expected putting additional weight on prices. With oil prices rising due to potential geopolitical conflict, US producers will likely increase oil production which will drive further production of natural gas.

Technical Analysis

Natural gas prices tumbled this week, rebounding slightly on Friday in light trade. The weekly breakdown shows support near the 1.88 level, which coincides with the May 2016 lows. Momentum has recently turned negative as the MACD (moving average convergence divergence) index generated a crossover sell signal. The MACD histogram is printing in the red with a downward sloping trajectory which points to lower prices. The fast stochastic generated a crossover sell signla in oversold territory. The current reading of 4, is well below the oversold trigger level of 20 and could foreshadow a correction.

The Weather is Warm

During the past week temperatures began cooler-than-normal across the eastern and central United States and much warmer-than-normal in the West. This pattern persisted through the report week as temperatures moderated in the western United States, particularly in the Southwest, resulting in stable or declining demand for space heating and cooling.

Demand fell slightly, driven by declining natural consumption in the electric power sector. Total US consumption of natural gas fell by 1% compared with the previous report week, according to data from the EIA. Natural gas consumed for power generation declined by 1% week over week. Industrial sector consumption decreased by 2% week over week. In the residential and commercial sectors, consumption increased by 3%. Natural gas exports to Mexico increased 2%.