Natural Gas Price Analysis for March 9, 2018

Natural gas prices edged lower on Thursday following the Department of Energy’s estimate of natural gas inventories.  Inventories were in line with expectations. The EIA also believe that prices will remain stable as robust production is met with increasing exports.

Technicals

Natural gas prices moved lower declining by 0.76% on Thursday following the EIA estimate on inventories. Prices hit a fresh 20-day high but were unable to hold elevated levels and eventually moved lower. Support is seen near the 10-day moving average at 2.70. Resistance is seen near the 50-day moving average at 2.89. Short term momentum as reflected by the fast stochastic is negative as the index just generated a crossover sell signal in overbought territory. Momentum, as reflected by the MACD, remains positive as the MACD histogram is printing in the black with an upward sloping trajectory which points to higher prices.

Inventories Were in Line with Expectations

The EIA reported that working gas in storage was 1,625 Bcf as of Friday, March 2, 2018. This represents a net decrease of 57 Bcf from the previous week. Expectations were for a decrease of 58 Bcf. Stocks were 680 Bcf less than last year at this time and 300 Bcf below the five-year average of 1,925 Bcf. At 1,625 Bcf, total working gas is within the five-year historical range.

The EIA Short Term Energy Outlook Expects Prices to Remain Stable

EIA estimates that U.S. dry natural gas production averaged 73.6 billion cubic feet per day in 2017. EIA forecasts that natural gas production will average 81.7 Bcf per day in 2018, establishing a new record. That level would be 8.1 Bcf per day higher than the 2017 level and the highest annual average growth on record. EIA expects natural gas production will also increase in 2019, with forecast growth of 1.0 Bcf per day.

EIA expects natural gas prices to moderate in the coming months, based on a forecast of record natural gas production levels. EIA expects Henry Hub spot prices to average $2.72/MMBtu in March and $2.99/MMBtu for all of 2018.