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Natural Gas Price Prediction – Prices Continue to Slide but are Oversold

Despite low levels of inventories prices continue to decline
David Becker

Natural gas prices continued to fall on Tuesday as Asian prices weighed on US sales. The decline in LNG exports is significantly reducing potential exports which was a strong source of demand for an oversupplied US product. Without export, US natural gas supplies will build up to levels that will continue to weigh on US prices.

Technical Analysis

Natural gas prices dropped on Tuesday, continuing to form a downtrend. Target support is seen near the February lows at 2.54. Momentum has turned negative as the MACD (moving average convergence divergence) index generated 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 MACD histogram is printing in the red with a downward sloping trajectory which points to lower prices and accelerating negative momentum. The fast stochastic also generated a crossover sell signal, which points to accelerating negative moemtnum. The current reading on the fast stochastic is 1, which is below the oversold trigger level of 20, and could foreshadow a correction.

Working natural gas in storage in the Lower 48 states as of March 31, the traditional end of the heating season totaled 1,137 billion cubic feet according to EIA’s Weekly Natural Gas Storage Report. As of March 31, working natural gas stocks were 491 Bcf which is 30% lower than the five-year average for the end of the heating season. This heating season ended at the lowest level for working natural gas stocks since 2014, when working natural gas stocks totaled 837 Bcf. Last year, working natural gas stocks ended the winter at 1,360 Bcf.

Working natural gas stocks totaled 3,198 Bcf entering the winter heating season in November 2018 their lowest levels since 2005 and declined during the winter at a rate consistent with historical trends. Net withdrawals from storage during the 2018―19 heating season was 2,061 Bcf, or 5% below the five-year average for the season.

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