Natural Gas Price Analysis – Prices Attempt to Move Higher on Weak Inventory Build

Natural gas prices attempted to move above resistance levels following a lower than expected build in natural gas inventories. With the injection season ending and prices likely to rise into the winter, the weaker builds could make prices vulnerable to higher levels. The weather is expected to be colder than normal for the next two weeks and spread from the mid-west toward the east and west coasts. This is a ridge trough pattern that is coming down from Canada.

Technical Analysis

Natural gas prices surged higher but was unable to break through a channel which is resistance near a downward sloping trend line that comes in near 3.28. Prices hit a high of 3.32 but was unable to hold on to gains.  Support is seen near the 10-day moving average at 3.20. Momentum has turned positive as the MACD (moving average convergence divergence) index generated 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.

Working Gas in Storage Rose Less than Expected

The EIA reported that working gas in storage was 3,143 Bcf as of Friday, October 26, 2018. This represents a net increase of 48 Bcf from the previous week. Expectation were for stocks to climb by 53 Bcf. Stocks were 623 Bcf less than last year at this time and 638 Bcf below the five-year average of 3,781 Bcf. At 3,143 Bcf, total working gas is below the five-year historical range.

Soft Manufacturing Weighs on Natural gas

The Institute for Supply Management reported that its index of national factory activity dropped 2.1% to 57.7 last month from 59.8 in September. Expectations were for the manufacturing index would decline slightly to 59 in October. The new orders sub index declined by 4.4 points to 57.4 which dipped from the robust 61.8 hit in September.