Natural Gas Price Prediction – Prices Rise to End the Week

Natural gas prices are attempting to move higher on Friday, as colder than normal weather is finally making its way into the northeast.  The weather pattern is still warm for the southern portion of the United States, which will mean that weather might not play a significant factor in demand use. An agreement with China and the potential to use an increasing amount of LNG which will be exported could significantly increase natural gas demand.

Technical Analysis

Natural gas prices are bounding above support which is an upward sloping trendline that comes in near 2.90. Resistance on natural gas is seen near the 200-day moving average which is seen near 3.13. A close above this level would lead to a short-squeeze that could take prices back to the 3.36 level. Negative momentum is decelerating as the MACD (moving average convergence divergence) histogram is printing in the red but the trajectory is positive which points to consolidation. The fast stochastic recently generated a crossover buy signal, and currently the fast stochastic is printing a reading of  13, below the oversold trigger level of 20 which could foreshadow a correction.

Demand Declined because of Warm Temperatures

Demand falls amid warm temperatures, according to the EIA. Total U.S. consumption of natural gas fell by 3% compared with the previous report week, according to data from the Department of Energy. 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 declined by 4%. Natural gas exports to Mexico increased 19%. U.S. exports to Mexico, which were low as a result of depressed holiday demand and higher production within Mexico, rebounded this week and reached a new daily high of 5.2 Bcf per day according to the Energy Information Administration. The rebound should keep the trajectory of draws relatively upbeat.