Natural Gas Price Analysis for February 26, 2018

Natural gas prices edged lower on Friday holding support level despite colder than normal weather which continues to spread across most of the western portion of the United States. The EIA released their inventory figures which showed a larger than expected draw but stocks remain within their 5-year average range.  Demand continues to decline as the warmer weather through most of February undercut natural gas use.

Technicals

Prices pushed through resistance now support near the 10-day moving average at 2.598.  Resistance is seen near the first Fibonacci retracement level of the move from the highs in January at 3.65 to the lows in February at 2.52, near 2.95. Momentum is turning as the MACD is poised to generate a crossover buy signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses above the MACD signal line (the 9-day moving average of the MACD line). The relative strength index (RSI) is moving sideways which reflects consolidation. The current reading on the RSI is 38, which is at the lower end of the neutral range.

Inventories Declined More than Expected

The EIA reported that working gas in storage was 1,760 Bcf as of Friday, February 16, 2018. This represents a net decrease of 124 Bcf from the previous week. Expectations were for a decline in inventories of 121 Bcf. Stocks were 609 Bcf less than last year at this time and 412 Bcf below the five-year average of 2,172 Bcf. At 1,760 Bcf, total working gas is within the five-year historical range.

Natural Gas Demand decreases significantly

Natural gas demand decreased significantly. Total U.S. consumption of natural gas fell by 14% compared with the previous report week, according to data from the EIA. Natural gas consumed for power generation declined by 4% week over week. Industrial sector consumption decreased by 6% week over week. Residential and commercial sector consumption declined by 24% week over week, largely because of warmer temperatures in the eastern half of the country. Natural gas exports to Mexico decreased 3%.