Natural Gas Price Prediction – Prices Rebound Slightly But Trend is for Lower Prices

Natural gas prices made a lower low and a higher low but close up on the session after hitting a fresh 4-year low. The trajectory of inventory levels is pointing to moving toward a fresh 5-year high. With the weather expected to be warmer than normal over the next 6-10 and 8-14 days, inventories will not likely draw enough to keep the current levels below the 5-year highs. Inventories are expected to decline by 114 Bcf this week according to survey provider Estimize. This compares to a 137 Bcf draw last week according to the Energy Information Administration. The larger than expected draw last week was due to an increase in demand.

Technical Analysis

Natural gas prices broke down below a weekly trend line that comes in near 1.83, and continues to trend lower despite Tuesday uptick in prices. Prices made a lower low and a lower high which is a sign of a downtrend. Target support is the 2016 lows at 1.61. Resistance is seen near the 10-day moving average at 1.83. Medium-term momentum has turned negative as the MACD (moving average convergence divergence) index, generated a crossover sell signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses below the MACD signal line (the 9-day moving average of the MACD line).

Demand Rose Last Week

Demand increases more than expected as total U.S. consumption of natural gas rose by 2% compared with the previous report week, according to the EIA. Natural gas consumed for power generation declined by 2% week over week as temperatures in the Southeast generally warmed, reducing the need for space heating in the region. Industrial sector consumption increased by 2% week over week. In the residential and commercial sectors, consumption increased by 4% as a cold front moved across the western and central United States. Natural gas exports to Mexico decreased 4%.