Natural Gas Price Prediction – Gas Consolidates and Edges Lower
Natural gas prices ended the session in the red after initially surging higher early in the trading session reaching 4.86, just shy of last weeks highs of 4.92. Prices moved down 1.25% but made a higher high and higher low. While demand remains strong production, levels hit record higher in 2018 offsetting higher production. The issue is that expectations for prices were low and a short-squeeze generated immense volatility.
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Technical Analysis
Support on natural gas prices is seen near the 10-day moving average at 4.20. Resistance is seen near the monthly highs at 4.92. Momentum is now neutral as the MACD (moving average convergence divergence) histogram is printing in the black with a flat trajectory which points to consolidation. The fast stochastic generated a crossover sell signal, but the trajectory is sideways also reflecting consolidation.
Ahead of the withdrawal season there was record production and expectations that they will be sustained going forward, moderated expectations for mid-winter natural gas prices while high demand raised summer spot gas prices, causing the summer-winter price spread to narrow. The colder than normal weather in early November started a short-squeeze which pushed prices above the $4 per mmbtu level pushing some hedge funds into bankruptcy. Hedge funds were short natural gas against long oil but those positions now appear to be resolved.
Durable Goods Order Sink More than Expected
U.S. factory orders that are expected to last more than 3-year fell the most in 15 months with a key category that tracks business investment showing weakness for a third straight month. According to the Commerce Department orders for durable goods dropped 4.4% last month. It was the third decline in the past four months with the October drop led by a huge decline in the volatile areas of commercial and military aircraft. Business investment was flat in October after declines in both August and September.