Natural Gas Price Analysis for February 2, 2018

Natural gas prices tumbled lower on Thursday following a reported from the Department of Energy that showed a lower than expected decline in natural gas inventories. The decline comes despite colder than normal weather which is forecast to cover most of the United States for the next 8-14 days. Stronger than expected U.S. Manufacturing failed to buoy prices.

Technicals

Prices continued to drop declining another 4% on Thursday after tumbling during the prior 2-trading sessions. Prices sliced through support which was former resistance near the 200-day moving average at 3.0. Support is seen near an upward sloping trend line which connects the lows in February to the lows in December and comes in near 2.57. 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).

Inventories Declined Less than Expected

The EIA reported that working gas in storage was 2,197 Bcf as of Friday, January 26, 2018. This represents a net decrease of 99 Bcf from the previous week, compared to expectations of 107 Bcf.. Stocks were 526 Bcf less than last year at this time and 425 Bcf below the five-year average of 2,622 Bcf. At 2,197 Bcf, total working gas is within the five-year historical range.

Manufacturing Remains Robust

The U.S. ISM manufacturing index edged lower in January but beat expectations.  The headline number came in at 59.1 compared to expectations that it would drop to 58.6 from 59.3 in December.  A measure of new orders cooled to 65.4 from an almost 14-year high of 67.4. Employment gauge fell to an eight-month low of 54.2 from 58.1. ISM measure of prices paid jumped to 72.7 from 68.3. Index of factory inventories rose to 52.3, indicating stockpiles were expanding, from 48.5. A gauge of production fell to 64.5 from 65.2. Export orders measure advanced to 59.8, the strongest since April 2011, from 57.6. Supplier deliveries gauge rose to 59.1, indicating longer lead times, from 57.2; index of backlogs climbed to 56.2 from 54.9