Natural Gas Price Prediction – Prices Decline as Higher Production Dwarfs Demand

Natural gas prices continued to trend lower, following Thursday’s larger than expected build in natural gas inventories. Recall, inventories rose 102 Bcf in the latest week, compared to expectations that inventories would rise 85 Bcd according to survey provider Estimize. Both the 6-10 and 8-14 day forecasts are milder than earlier in the week, which will likely reduce cooling demand and overall natural gas residential demand. Both Tropical storm Karen and Hurricane Lorenzo are in the middle of the Atlantic and are expected to have no effect on the US.

Technical Analysis

Natural gas prices declined 1.4% on Friday after declining on Thursday by 3.5%. For the week natural gas prices were down by 4.9%. Target support is seen near an upward sloping trend line that comes in near 2.3. Resistance is seen near the 10-day moving average at 2.56. Medium-term 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). Short term momentum continues to remain negative as the fast stochastic tumbled, falling to a reading of 6, below the oversold trigger level of 20 which could foreshadow a correction.

Injections Rose More than Expected

The Energy Information Administration reported that net injections into storage totaled 102 Bcf for the week ending September 20, compared with the five-year average net injections of 74 Bcf and last year’s net injections of 51 Bcf during the same week. Working gas stocks totaled 3,205 Bcf, which is 47 Bcf lower than the five-year average and 444 Bcf more than last year at this time. The average rate of net injections into storage is 28% higher than the five-year average so far in the refill season. If the rate of injections into storage matched the five-year average of 10.7 Bcf/d for the remainder of the refill season, total inventories would be 3,645 Bcf on October 31, which is 47 Bcf lower than the five-year average of 3,692 Bcf for that time of year.