Natural Gas Consolidates – Inventories Rise in Line with Expectations

Natural gas prices edged higher on Thursday following an in-line inventory report from the Department of Energy. Hurricane activity in the Atlantic and now the Caribbean, could generate volatility given the infrastructure in the Gulf of Mexico. Inventories showed that the trajectory of the increase will leave stockpiles below the 5-year range in November when the withdrawal season comes. Traders continue to watch the Caribbean to see if Tropical Storm Isaac makes its way into the Gulf of Mexico and creates a scenario where oil rigs evacuate their employees.

Technicals

Prices moved higher and increased up to resistance near the 50-day moving average at 2.84. Additional resistance is seen near the 20-day moving average at 2.87. Support is seen near the September lows at 2.75. Momentum is turning positive as the fast stochastic generated a crossover buy signal which reflects accelerating positive momentum. The MACD (moving average convergence divergence) index is printing in the red but the trajectory points to a future crossover buy signal, which also points to accelerating positive momentum.

Inventories are growing but Not Fast Enough

The EIA released its inventory report on Thursday which was in line with expectations. The trajectory continues to rise but at a rate that is not fast enough to fill storage by November. Production remains very strong, and demand is relatively flat, which is counter intuitive since inventories continue to remain below the 5-year average range.

According to the Energy Information Administration, working gas in storage was 2,636 Bcf as of Friday, September 7, 2018. This represents a net increase of 69 Bcf from the previous week. This was in line with expectations. The EIA also revealed that stocks were 662 Bcf less than last year at this time and 596 Bcf below the five-year average of 3,232 Bcf. At 2,636 Bcf, total working gas is below the five-year historical range.