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Natural Gas Price Prediction – Prices Consolidate Forming Bear Flag

Inventories declined less than expected
David Becker

Natural gas prices continued to consolidate forming a bear flag pattern, despite a smaller than expected draw in natural gas inventories. The weather is expected to be colder than normal over the next 6-10 days, but then turn normal during the 8-14 day period. The market remains heavily short in the managed money category, which could lead to a short-squeeze if the weather forecast begins to show cooler than normal weather.

Technical analysis

Natural gas prices edged higher on Thursday but continue to form a bear flag pattern. This is a continuation pattern that occurs following a sharp selloff. After the initial drop, prices whipsaw and then consolidate before continuing to decline. An increase in volatility is what is expected after the market breaks down. Resistance near the breakdown level near 2.47. Support is seen near last week’s lows near 2.27. Medium-term momentum is negative as the MACD histogram is printing in the red with a downward sloping trajectory which points to lower prices. Short term momentum continues to whipsaw generating a crossover buy signal on Tuesday and is now poised to generate a crossover sell signal. This type of pattern reflects consolidation.

Inventories Decline Less than Expected

The Energy Information Administration reported on Thursday that natural gas in storage was 3,591 Bcf as of Friday, November 29, 2019. This represents a net decrease of 19 Bcf from the previous week. Expectations were for a 31 Bcf decline according to survey provider Estimize.  The EIA also reported that natural gas stocks were 591 Bcf higher than last year at this time and 9 Bcf below the five-year average of 3,600 Bcf. At 3,591 Bcf, total working gas is within the five-year historical range.

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