Natural Gas Price Prediction – Inventory Builds Weigh on Prices

Inventory builds weigh on prices
David Becker
Natural gas daily chart, July 26, 2019

Natural gas prices continued to move lower on Friday as robust inventory builds and the lack of tropical activity weighed on prices. There is no reported tropical activity expected in the Atlantic or Gulf of Mexico for the next 48-hours according to the National Oceanic Atmospheric Administration (NOAA). NOAA also reported that the weather in the North East will be warmer than normal over the next 6-10 days but become milder during the 8-14 day period.

Technical Analysis

Natural gas prices eased on Friday and continued its downtrend. Prices are poised to test target support near the July lows at 2.21. Resistance is seen near the 10-day moving average at 2.31. Momentum has turned negative as the MACD (moving average convergence divergence) index generate a crossover sell 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 fast stochastic continued to decline and is now in oversold territory. The current level of 6.5 is well below the oversold trigger level of 20 and could foreshadow a correction.

Inventory Builds Weigh on Prices

Prices continue to trade under pressure due to large inventory builds. The US Department of Energy reported on Thursday that working gas in storage was 2,569 Bcf as of Friday, July 19, 2019. This represents a net increase of 36 Bcf from the previous week. Expectations were for natural gas stockpiles to rise by 33 Bcf according to Estimize. Stocks were 300 Bcf higher than last year at this time and 151 Bcf below the five-year average of 2,720 Bcf. The rise in production is putting downward pressure on natural gas prices, At 2,569 Bcf, total working gas is within the five-year historical range. Prices are now hovering in the middle of the 5-year average range for this time of year.

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