Natural Gas Price Prediction – Prices Rally on Rig Count Decline

Natural gas prices continued to trade sideways moving higher on Monday despite mixed weather throughout the United States. While the weather in the west of the US is expected to be much warmer than normal over the next 6-10 and 8-14 days, the weather over the next two weeks is expected to be much colder than normal on the east coast. The number of active natural gas rigs have declined to 2016 lows.

Technical Analysis

Natural gas prices whipsawed rising nearly 5%, and poised to test resistance levels near the April highs at 2.10. Prices were able to hold above support seen near the 10-day moving average at 1.94. Short term momentum has turned positive as the fast stochastic generated a crossover buy signal. The current reading on the fast stochastic is 70, which is on the upper end of the neutral range. Medium-term momentum has turned positive as the MACD (moving average convergence divergence) index generated a crossover buy signal. The MACD histogram also generated a crossover buy signal but the trajectory is relatively flat which makes one believe that there will be further consolidation.

Rig Count Drops Sharply

Baker Hughes reported that the number of active natural gas rigs in the United States fell to 85 on April 21, the lowest number of active natural gas rigs since August 2016. As of that date, there were 38 fewer active natural gas rigs than at the beginning of 2020 and 101 fewer than last year at the same time. The drop in rigs for both natural gas and oil will reduce the amount of MMBTU’s that are produced going forward.