Natural Gas Price Forecast: Bullish Breakout Fizzles, Testing Support Levels
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Jun 05 2024
0mins
Source: NASDAQ.COM
- Natural Gas Price Movement: Natural gas experienced an upside breakout of a bullish flag pattern but later fell back into consolidation, with resistance at 2.83 leading to a decline.
- Potential Support Levels: The price of natural gas may test support near the lower boundary line of the pennant consolidation pattern around 2.54, close to the 20-Day Moving Average (MA) at 2.52.
- Long-Term Indicators: The 200-Day MA at 2.45 is a key long-term indicator that could act as support, along with the 20-Day MA which has not been tested since April 26.
- Bullish Posture Outlook: Natural gas is expected to maintain a bullish posture if it stays above the 200-Day MA and even more so if it remains above the 20-Day MA.
- Author's Disclaimer: The views expressed in the article are those of the author and do not necessarily reflect those of Nasdaq, Inc.
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About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- Last week, U.S. natural gas prices fell over 6% due to increased production and changing weather patterns.
- Natural gas futures settled at $2.705, marking a significant decrease.
- Prices declined for the fifth time in six sessions driven by high production levels from the Appalachian region.
- Despite extreme heat boosting spot prices, rising production levels offset the impact on the market.
- The potential cooling rains from a tropical storm added uncertainty and contributed to bearish sentiment among traders.
See More
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- Natural Gas Trading: Natural gas showed strength by trading near the highs of the previous day, with signs of closing above the downtrend line.
- Technical Analysis: The bounce from a recent low confirmed the 20-Day Moving Average as relevant for the current uptrend. A bullish reversal set the stage for further upward movement.
- Retracement Levels: After a significant advance, a retracement to around 50% occurred, indicating a healthy correction in the price movement.
- Weekly Outlook: A potential weekly bullish pattern may form if support at 2.76 holds and the week ends in the top third of the range, negating the previous bearish signal.
- Future Price Targets: A rally above 3.16 could continue the uptrend, with resistance expected around 3.20 before targeting the swing high of 3.39 from early January.
See More
Natural Gas News: Can Heatwave Overcome Rising Production?
- U.S. Natural Gas Futures: Experienced a volatile week, initially climbing above $3/MMBtu but ultimately succumbing to bearish pressure due to increased production and a less severe heatwave forecast.
- Market Trends: While futures prices declined, cash markets saw a surge as users scrambled for supply ahead of an expected late-June heat spike.
- Factors Contributing to Bearish Sentiment: Comfortable storage levels, robust production in the Lower 48 states, and the completion of the Mountain Valley Pipeline (MVP) contributed to bearish sentiment in futures.
- Potential Bullish Factors: Forecasts predict a heatwave driving up demand for natural gas-fired power generation, potentially supporting cash prices.
- Outlook: Short-term outlook for natural gas futures leans bearish due to ample storage and rising production, but traders should monitor storage reports, pipeline developments, and weather updates for potential shifts in market dynamics.
See More
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- Support Levels: Support is expected around the uptrend line at 2.84 to 2.82, but if it fails, the price could drop further.
- Trend Adjustment: A lower slope angle in the trend may be necessary as steep trends can lose momentum, while shallower trends tend to increase in angle over time.
- Weekly Outlook: The weekly chart shows a bearish shooting star pattern, similar to previous weeks that led to a brief drop before continuing the uptrend.
- Future Projection: Despite retracements, there is potential for natural gas to continue rising towards a target of 3.78, indicating more upside in the current trend.
See More
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- Natural Gas Futures Surge: Natural gas futures rose close to $3 due to hot weather forecasts for late June, despite a bearish government inventory report.
- Demand and Inventory: Cooling demand in the West is expected to ease, but national demand may rise in the third week of June. The latest EIA report showed an injection of 98 Bcf into storage, slightly below the five-year average.
- Production Trends: U.S. dry gas production has been declining since late 2023, with lower inflation-adjusted futures prices and fewer active rigs. Production is expected to remain flat without a price rebound.
- LNG Market: LNG feed gas volumes have decreased, impacted by maintenance at some terminals. Regional price movements varied, with California prices falling and West Texas prices rising.
- Market Outlook: Bullish outlook due to upcoming hot weather increasing demand. Production constraints and summer combustion demand are likely to tighten supplies, supporting higher prices.
See More
