Natural Gas Price Prediction – Prices Drop Ahead of Inventory Report

Natural gas prices whipsawed forming an outside reversal day, ahead of Thursday’s inventory report by the Department of Energy. Expectations are for a 99 Bcf build according to survey provider Estimize. Producers of natural gas and oil are operating at the lowest levels on record according to Baker Hughes. The weather is expected to be warmer than normal throughout most of the United States, but cooling degree days are generally mild in May.

Technical Analysis

Natural gas prices whipsawed forming an outside day which is a higher high a lower low and a lower close. This follows 2-consecutive large daily rallies, ahead of Thursday’s inventory report. Short term resistance is seen near the 50-day moving average at 1.85. Short-term support is seen near the 10-day moving average at 1.76. A drop below this level would lead to a test of the May lows at 1.60. Short-term momentum has reversed and turned negative as the fast stochastic generated a crossover sell signal after creating a crossover buy signal earlier in the week. Despite lower production, inventories remain elevated.

Declining Rig Count fails to Buoy Prices

The EIA reported that oil and gas producers were operating the fewest oil and natural gas drilling rigs on record in the United States at 339 on May 12, the lowest level in the Baker Hughes Company’s rig count data series that dates back to 1987. The number of active rigs began sharply decreasing in mid-March as crude oil prices fell: rigs have fallen by 56% since March 17. Most of the decrease was in oil-focused geologic plays, but natural gas-focused plays also saw significant decreases.