Natural Gas Price Analysis – Prices Form Inside Day Despite Meager Inventory Build

David Becker
Natural gas daily chart, July 11, 2018

Natural gas prices eased lower on Thursday despite a smaller than expected build in natural gas inventories. The mild weather that is expected to cover most of the United States for the next 8-14 days has generated headwinds. Prices slipped nearly 1%, forming an inside day which is a lower high and a higher low which reflects indecision. The 10-day moving average crossed below the 50-day moving average showing that a short-term down trend is now in place. Resistance is seen near the 10-day moving average at 2.85. Support is seen near an upward sloping trend line that comes in near 2.67.

Inventories Grew Less than Expected

The EIA reported that working gas in storage was 2,203 Bcf as of Friday, July 6, 2018. This represents a net increase of 51 Bcf from the previous week. Expectations were for stocks to climb by 55 Bcf. Stocks were 725 Bcf less than last year at this time and 519 Bcf below the five-year average of 2,722 Bcf. At 2,203 Bcf, total working gas is within the five-year historical range.

Electrical Generation Demand Should Increase

EIA expects the share of U.S. total utility-scale electricity generation from natural gas-fired power plants to rise from 32% in 2017 to 34% in 2018 and to 35% in 2019. In this outlook, coal’s forecast share of electricity generation falls from 30% in 2017 to 28% in 2018 and to 27% in 2019. The nuclear share of generation was 20% in 2017 and is forecast to be slightly less than that share in 2018 and in 2019. Non-hydropower renewables provided slightly less than 10% of electricity generation in 2017 and are expected to provide more than 10% in 2018 and nearly 11% in 2019. The generation share of hydropower was 7% in 2017 and is forecast to be slightly less than that share in 2018 and in 2019.

Canada’s new housing price index was flat

Canada’s new housing price index was flat in May after the identical steady readings in April and March. The index was 0.9% higher compared to May of 2017, down from the 1.6% year over year gain in April. That is the smallest annual gain since February of 2010’s 0.8% year over year rise.

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