Natural Gas Consolidates But Inventories Remain Low

Natural gas prices moved sideways on Friday, although inventories are near the bottom of their five year range. Demand remains strong and but domestic production is continuing to remain robust. Support is seen near the 10-day moving average at 2.90. Resistance is seen near the May highs at 2.99.  Momentum is neutral as the MACD (moving average convergence divergence) histogram prints near the zero index level with a flat trajectory which reflects consolidation.

Storage Rises Less than Expected

Working gas in storage was 1,725 Bcf as of Friday, May 25, 2018. This represents a net increase of 96 Bcf from the previous week. Expectations were for a 100Bcf increase. Stocks were 788 Bcf less than last year at this time and 500 Bcf below the five-year average of 2,225 Bcf. At 1,725 Bcf, total working gas is within the five-year historical range. U.S. nonfarm payrolls increased more than expected.

Supply rises as domestic production continues

Supply rises as domestic production continues its growth. According to data from the EIA, the average total supply of natural gas rose by 1% compared with the previous report week. Dry natural gas production grew by 1% compared with the previous report week, averaging 80.2 Bcf/d. This change represents an increase of 11% since this time last year when dry production averaged 71.9 Bcf/d. Average net imports from Canada increased by 2% compared with the previous report week.

Demand remains flat

Total U.S. consumption of natural gas was unchanged from the previous report week, averaging 56.7 Bcf/d according to data from the EIA. Natural gas consumed for power generation climbed by 7% week over week, as hot weather in the South and Midwest increased electricity demand. Industrial sector consumption decreased by 1% week over week. In the residential and commercial sectors, consumption declined by 19%, though this decrease only represented about 1.7 Bcf/d of natural gas because heating demand is normally low at this time of year. Natural gas exports to Mexico increased 2%.