Natural gas daily chart, September 04, 2018

Natural Gas Price Prediction – Prices Drop as Hurricane Treat Passes

Natural gas prices tumbled on Tuesday despite concern that tropical storm Gordon would turn into a hurricane in the Gulf of Mexico. Several oil and gas rigs have pulled their employees off their platforms which will likely reduce production. The decline offset the gains seen on Friday (natural gas was closed on Monday), as traders had priced in worse conditions. The weather is expected to be warmer than normal throughout the United States for the next 8-14 days which should increase cooling demand.

Technical Analysis

Prices dropped 3.5% on Tuesday, falling to support near an upward sloping trend line that comes in near 2.81. Resistance is seen near the 50-day moving average at 2.86. Additional resistance is seen near the 20-day moving average at 2.90. Momentum is negative as the MACD (moving average convergence divergence) histogram prints in the red with a declining trajectory which points to lower prices. The RSI (relative strength index) broke down, reflecting accelerating negative momentum. Prices continue to grind along in a choppy uptrend.  The current reading on the RSI is 40, which is the lower end of the neutral range.

The Hurricane Treat has Been Diminished

Hurricane Florence with max winds of 75 miles an hour appears to be turning north and will not be a treat to the US mainland. Tropical storm Gordon is churning in the gulf and is likely to make landfall in Mississippi. The damage to infrastructure will not be as bad as it could have been which allowed many to take profits on the recent run up in natural gas prices. Inventories of natural gas remain well below the 5-year average range, while prices remain well below the 5-year average price of natural gas. The difference is that many believe that high level of production will offset any future inventory losses.  Natural gas production remains at all-time highs while production is flat year over year.