Natural Gas Breaks Higher Ahead of Inventory Report

Natural gas prices surged and closed higher after rising on Tuesday.  The move comes ahead of Thursday’s inventory report from the Department of Energy. Expectations are for a 189 inventory draw in stockpiles. This figure compares with the 5-year average of -154 and last year’s withdrawal of -227. The weather is expected to be milder than normal over the next 2-weeks so the real demand will come from rising commercial activity or higher LNG exports. LNG exports are near record highs as markets push LNG to Europe. The spread between UK Natural gas in mmbtu’s and Henry Hub natural gas futures contracts is close to $18 per mmbtu and is hovering near the 200-day moving average.

 Technical Analysis

Natural gas prices moved higher, pushing through former resistance now support at the 10-day moving average at 4.30. Resistance is seen near the February highs at 4.86. Short-term momentum has turned positive as the fast stochastic generated a crossover buy signal. Medium-term momentum is poised to turn positive as the MACD (moving average convergence divergence) index generated a crossover buy signal. This scenario occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses below the MACD signal line.