Natural Gas Forecast – Prices Rise on Warmer Weather Outlook
Natural gas prices moved higher on Wednesday rising 0.75% but remaining in an uptrend. Warmer than normal weather is expected to cover most of the United States for the next 8-14 days which foreshadows the need for additional cooling demand which could increase natural gas demand.
Support is seen near the 10-day moving average at 2.93. Resistance is seen near the June highs at 2.99. Momentum is neutral as the MACD (moving average convergence divergence) histogram is printing near the zero-index level with a flat trajectory which reflects consolidation. Trader’s await the EIA inventory report which is scheduled for Thursday. Wednesday’s demand forecast for distillates showed declining demand for heating oil. Inflation was hotter than expected mainly because of a rise in petroleum and natural gas.
Distillate Demand Edged Lower
Demand remains strong. Total products demand over the last month averaged more than 20.4 million barrels per day, up by 1.7% from the same period last year. Over the past month, gasoline demand averaged about 9.6 million barrels per day, up by 0.3% from the same period last year. Distillate fuel demand averaged 4.0 million barrels per day over the past four weeks, down by 0.5% from the same period last year.
PPI Was Hotter than Expected
Wholesale price inflation came in much hotter than expected which was in contrast to Tuesday consumer price index. The Labor Department reported that PPI rose 0.5% more than the 0.3% expected. There were no revisions to April where the headline edged up 0.1% with the core up 0.2%. Year over year headline PPI jumped to 3.1% year over year versus 2.6% year over year, with the core rate at 2.4% year over year versus 2.3% year over year. If the CPI reached these levels, the Fed would be raising rates at a much faster level. Goods prices were up 1.0% last month after a flat reading in April, with energy 4.6% higher versus the prior 0.1% gain, with food prices bouncing 0.1% from -1.1% previously.