Natural Gas Price Prediction – Prices Drop as Exports are Expected to Decline

Natural gas prices tumbled on Monday as concerns of the spread of the coronavirus continued to weigh on the energy complex. The lack of growth in China and the rest of Asia could reduce demand for LNG, which is a source of demand for the natural gas industry. The weather is expected to be warmer than normal over the next 8-14 days according to the National Oceanic Atmospheric Administration. Managed money reduced short position in futures and options and added to long position according to the most recent commitment of trader’s report.

Technical Analysis

Natural gas prices dropped nearly 4% on Monday, reversing the gains seen last week. Prices are poised to retest the February lows at 1.74, as short-term momentum turns negative. Resistance on natural gas is seen near the 10-day moving average at 1.87. Short term momentum has turned negative as the fast stochastic generated a crossover sell signal. The MACD histogram is printing in the black with a sliding trajectory which points to consolidation.  The relative strength index moved lower and reflects accelerating negative momentum. The current reading of the RSI is 41, which is in the middle of the neutral range and reflects consolidation.

Hedge Funds Reduce Short Positions

According to the latest commitment of trader’s report released for the date ending February 18, 2020, managed money reduced short position in futures and options by 15.5K contracts while increasing long position in futures and options by 21K contracts. Despite the reduction in short open interest, hedge funds that are short natural gas outnumber hedge funds that are long futures and options by 2.6-times, down from nearly 3-times last week.