Natural Gas Price Prediction – Prices Decline Following Bearish Inventory Report

Natural gas prices moved lower on Thursday and continued to perpetuat a downtrend. Prices were under pressure following a larger than expected build in natural gas inventories reported on Thursday by the Department of Energy. The weather is expected to be warmer than normal over the next 6-10 days, but moderate temperature is unlikely to move the needle in April.

Technical Analysis

Natural gas prices continued to move lower after breaking through key support levels near 2.54. The contract lower was 2.48. The next level of target support is the 2016 lows at 1.61. Resistance is seen near the former breakdown level which is a horizontal trend line at 2.55. 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 2 which is below the oversold trigger level of 20, and could foreshadow a correction.

Inventories Rose More than Expected

The EIA reported that working gas in storage was 1,247 Bcf as of Friday, April 12, 2019. This represents a net increase of 92 Bcf from the previous week. Expectations were for a 72 Bcf build. Stocks were 57 Bcf less than last year at this time and 414 Bcf below the five-year average of 1,661 Bcf. At 1,247 Bcf, the total working gas is within the five-year historical range. Stocks are on the rise, and the trajectory is pointing to rising inventories that are likely to reach the middle of the 5-year range.