Natural Gas Price Prediction – Prices Slide Through Support as Supply Increases

Natural gas prices moved lower on Monday as fear of tropical storm activity abated.  The weather is expected to be warmer than normal over the next 6-10 days, but then becomes milder, according to a forecast from the National Oceanic Atmospheric Administration. The most recent report from the EIA showed a larger than expected build in natural gas inventories, but stocks remain well below the 5-year average. U.S. Supply increased in the latest week.

Technical Analysis

On Monday, natural gas prices dropped sharply, falling 2.75% and gapping lower through key support, which is now resistant near the 10-day moving average at 5.08. Support is seen near the 50-day moving average at 4.23. Short-term momentum has turned negative as the fast stochastic recently generated a crossover sell signal. Medium-term positive momentum is decelerating as the MACD (moving average converge divergence) histogram is printing in negative territory with a declining trajectory which points to consolidation.

Supply Increases

U.S. supply increases as production begins to come back online in the Gulf of Mexico. According to data from the EIA, the average total supply of natural gas rose by 1.7% compared with the previous report week. Dry natural gas production grew by 1.4%, or 1.3 Bcf per day, compared with the previous report week. According to daily reports from BSEE, on a weekly basis, natural gas production outages in the Federal Offshore Gulf of Mexico decreased by about 0.6 Bcf per day this report week compared with the last report.