Natural Gas Price Analysis for January 30, 2018

Natural gas prices whipsawed initially moving lower and testing support level before surging higher closing up nearly 2.5%.  Colder than normal weather is expected to cover most of the United States over the next 6-14 days according to the latest forecast from the National Oceanic Atmospheric Administration. Colder weather generally increases heating demand. Inventories are well below historicl levels for this time of year.

Technical Analysis

Support is seen near the 10-day moving average near 3.345. Resistance is seen near the January highs at 3.62, and then the December 2016 highs at 3.99. Prices are forming a bull flag continuation pattern that is a pause that refreshes higher. Momentum remains positive as the MACD (moving average convergence divergence) histogram prints in the black with an upward sloping trajectory which points to higher prices.

Inventories Decline to Well Below 5-year Lows

Working gas deficit to the five-year average grows by 124 Bcf. This means that colder weather will pinch inventories and likely buoy prices. Net withdrawals from storage totaled 288 Bcf for the week ending January 19, compared with the five-year net withdrawal of 164 Bcf and last year’s net withdrawals of 137 Bcf during the same week. Working gas stocks total 2,296 Bcf, which is 486 Bcf less than the five-year average and 519 Bcf less than last year at this time. Working gas stocks are 59 Bcf less than the 5-year range for this period.

Withdrawals from Storege are Soaring

Withdrawals from storage totaled 1,036 Bcf during the last four report weeks. Total net withdrawals over the last four weeks top the previous four-week record of 980 Bcf, posted for the period between January 17 and February 14, 2014, during a polar vortex. This week’s withdrawal from storage of 288 Bcf tied the second-highest net withdrawal ever reported. The two largest weekly net withdrawals in the history have occurred in the last three weeks. If withdrawals from storage match the five-year average for the remainder of the heating season, which traditionally runs from October 31 to March 31, working gas stocks will total 1,216 Bcf, or 29% lower than the five-year average.