Natural Gas Inventory Report – Prices Drop but Hold Support Ahead of Inventory Report

Natural gas prices continued to trend lower, ahead of Thursday’s inventory report. Expectations are for a 95 Bcf build in natural gas inventories according to surveyor Estimize. Traders continue to unwind a large squeeze higher that has led to a selloff in natural gas. Both the 6-10 and 8-14 day forecasts are milder than normal which will likely reduce cooling demand and overall natural gas residential demand. Both Tropical storm Karen and Hurricane Lorenzo are in the middle of the Atlantic and are expected to have no effect on the US.

Technical Analysis

Natural gas prices declined 1.4% on Tuesday but rebounded at trend line support near an upward sloping trend line that comes in near the session lows at 2.30. Resistance is seen near the 10-day moving average at 2.48. Medium-term momentum has turned negative as the MACD (moving average convergence divergence) index generated a crossover sell signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses below the MACD signal line (the 9-day moving average of the MACD line). Short term momentum has turned positive as the fast stochastic generated a crossover buy signal in oversold territory. The current reading of 6, is below the oversold trigger level of 20 which could foreshadow a correction.

Supplies Continue to Rise

The EIA reports that supply rises slightly, buoyed by stronger than normal production. According to data 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. Average net imports from Canada decreased by 6% from last week.