Natural Gas Price Prediction – Prices Consolidate Ahead of EIA Inventory Report

Natural gas prices attempted to move higher on Wednesday but were unable to gain traction and experienced a wave of selling near resistance. This comes ahead of the Thursday inventory report from the Department of Energy. Expectations are for a 57 Bcf increase according to reporting service Estimize. Last week, inventories came in at 65 Bcf well above the 42 Bcf increase expected by analysts. There are no expected tropical cyclones expected in the Atlantic or the Gulf of Mexico during the next 48 hours according to the National Oceanic Atmospheric Administration (NOAA). Additionally, the weather in the US is expected to be cooler than normal over the next 8-14 days potentially reducing cooling demand.

Technical Analysis

Natural gas prices attempted to rebound but ran into resistance near the 10-day moving average near 2.15 and sold off to close lower. Support is seen near the 2016 lows at 1.62. Medium-term momentum is negative as the MACD (moving average convergence divergence) histogram is printing in the red with a downward sloping trajectory which points to lower prices. The fast stochastic, which is an oscillator that measures overbought and oversold levels, is printing a reading of 22, just above the oversold trigger level of 20.

The EIA Forecasts Production will Rise

Relatively low natural gas prices have also led to higher natural gas-fired generation this summer. Which has helped reduce the overall cost of electricity throughout most of the United States. The EIA forecasts that US dry natural gas production will average 91.0 billion cubic feet per day in 2019, up 7.6 Bcf per day from 2018. EIA expects monthly average natural gas production to grow in late 2019 and then decline slightly during the first quarter of 2020 as the lagged effect of low prices in the second half of 2019 reduces natural gas-directed drilling. However, EIA forecasts that growth will resume in the second quarter of 2020, and natural gas production in 2020 will average 92.5 Bcf per day.