Natural Gas Price Prediction – Prices Break Out Following Unexpected Lower Inventory Build

Natural gas prices surged higher on Thursday following a smaller than expected build in natural gas stockpiles reported by the Department of Energy. The weather is expected to remain warmer than normal for the next 2-weeks in nearly every part of the United States but the Pacific Northwest. Tropical Depression number 9 is entering the Gulf of Mexico and is on course to slam into Louisiana, which should boost Henry Hub prices. Two other storms in the Atlantic have a 50% chance of becoming a tropical cyclone over the next 48-hours.

Technical Analysis

Natural gas prices broke out and closed at a contract higher for the October contract, a day before it becomes the prompt contract. Support is seen near the 10-day moving average at 3.93. Resistance is seen near the 2018 highs at 4.85. Short-term momentum has turned positive as the fast stochastic generated a crossover buy signal. Medium-term 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).

Inventories Rise Less than Expected

Natural gas in storage was 2,851 Bcf as of Friday, August 20, 2021, according to the EIA. This represents a net increase of 29 Bcf from the previous week. Expectations were for a 40 Bcf build according to survey provider Estimize. Stocks were 563 Bcf less than last year at this time and 189 Bcf below the five-year average of 3,040 Bcf. At 2,851 Bcf, total working gas is within the five-year historical range.