Natural Gas Price Prediction – Prices Continue to Rebound Ahead of Inventory Report

Natural gas prices moved higher on Tuesday and continued to rebound after tumbling late last week. The larger than expected inventory build reported last Thursday by the Department of Energy weighed on Prices. Expectations have been for a 114 Bcf build but instead, the EIA reported at 119 Bcf build. This week expectations are for a 119 Bcf build according to Estimize. Inventories have been rising with an upward sloping trajectory and are poised to recapture the 5-year average for this time of year.

Technical Analysis

Natural gas prices moved higher on Tuesday, rebounding back toward resistance near the 10-day moving average at 2.42. Support on natural gas is seen near the June lows at 2.30. A break of this level is seen near the 2016 lows at 1.91. Short-term momentum has turned positive as the fast stochastic generated a crossover buy signal. The fast stochastic is printing a reading of 18, below the oversold trigger level of 20 which could foreshadow a correction. Medium term momentum has turned neutral as the MACD (moving average converence divergence) histogram prints in the red with an upward sloping trajectory which points to consolidation.

Production is Unchanged, Demand is Rising

The EIA reported that supply is unchanged, with the the average total supply of natural gas remained the same as in the previous report week, averaging 94.2 Bcf per day. Dry natural gas production decreased by 1% compared with the previous report week. Average net imports from Canada increased by 8% from last week.

Increased natural gas-fired power generation drives rising demand. Total U.S. consumption of natural gas rose by 4% compared with the previous report week, according to the EIA. Natural gas consumed for power generation climbed by 10% week over week. Industrial sector consumption increased by 2% week over week. In the residential and commercial sectors, consumption declined by 11%. Natural gas exports to Mexico increased by 1%.