Natural Gas Price Prediction – Gas Prices Selloff Pricing in a Robust Inventory Build

Natural gas prices moved lower for a 3^rd consecutive trading session.  Prices are giving back some of the gains experienced last week. This comes despite low inventory levels that have a flat trajectory and have a lot of stockpiles to make up prior to the withdrawal season.  The weather is expected to be warmer than normal over the next 8-14 days which should drive up cooling demand at the tail end of the summer cooling season.  Production continues to remain buoyed which is keeping a lid on prices. There is no tropical cyclone weather expected in the Atlantic or Caribbean for the next 48-hours.

Technical Analysis

Prices dropped for the 3^rd consecutive trading session but found support near the 200-day moving average at 2.85. Additional support is seen near an upward sloping trend line that comes in near 2.82. Resistance is seen near the August highs at 3.0. Momentum has turned negative 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 below the MACD signal line (the 9-day moving average of the MACD line). The MACD histogram is printing in the red with a declining trajectory which points to lower prices. The relative strength index (RSI) moved lower with prices which reflects accelerating negative momentum.

Natural Gas Inventories are Expected to Rise

Natural gas inventories are expected to rise by 57 BCF according to estimize. This would put inventories on an upward trajectory which is expected at this time of year. Demand last week was softer than expected which could allow inventories to rise. The price drop experienced over the last three trading session is pricing in a robust rise in inventories.  Anything less than 50 Bcf, will likely generate a short-squeeze in natural gas prices.