Natural Gas Price Analysis for February 9, 2018

Natural gas prices moved lower by nearly 0.5%, making a fresh lower low, despite a larger than expected draw in natural gas inventories reported by the Department of Energy on Thursday. Trader’s instead focused on the weather forecast which is expected to show warmer than normal weather covering nearly all of the United States for the next 2-weeks. Warmer weather reduces heating demand, which in turn spills over into lower natural gas prices.

Technicals

Natural gas prices made a lower low and lower high perpetuating the downtrend. Support on natural gas is seen near an upward sloping trend line which comes in near 2.57.  Resistance is seen near the 10-day moving average at 2.99. Momentum on natural gas remains negative as the MACD (moving average convergence divergence) histogram prints in the red with a downward sloping trajectory which points to lower prices for natural gas. The RSI (relative strength index) moved lower in tandem with price action which reflects accelerating negative momentum.

Inventories Declined Less Than Expected

The Department of Energy reported that working gas in storage was 2,078 Bcf as of Friday, February 2, 2018, according to latest estimates. This represents a net decrease of 119 Bcf from the previous week. This compares to expectations that inventories would decline by 116 Bcf. Stocks were 503 Bcf less than last year at this time and 393 Bcf below the five-year average of 2,471 Bcf. At 2,078 Bcf, total working gas is within the five-year historical range.

Jobs Data Reflects Robust Growth

U.S. initial jobless claims fell 9k to 221k in the week ended February 3, the lowest since March 1973, after dipping 1k to 230k in the January 27 week. The 4-week moving average dropped to 224.5k from 234.5k. Continuing claims declined 33k to 1,923k in the January 27 week after rising 16k to 1,956k which was revised from 1,953k. Data continue to show a tight labor market, helping the dollar gain traction which weighed on natural gas prices.