Natural Gas Price Prediction – Prices Drop but are Oversold

Natural gas prices continue to move lower, despite a colder than normal weather forecast that is expected to cover most of the mid-west and east coast of the United States for the next 2-weeks according to the National Oceanic Atmospheric Administration. The cooler temperatures are likely to weigh on inventories pulling them back below the 5-year average range for this time of year. The 5-year high for natural gas as this time of year is $6.45, double the current price. LNG exports from the United States have hit fresh monthly highs according to the EIA, with new plants continuing to come on board driving up export demand.

Technical Analysis

Natural gas prices continued to decline dropping 1.5% making a lower low and a lower higher which reflects a downtrend. Resistance is seen near the 10-day moving average at 3.24. Support is seen near an upward sloping trend line that comes in near 2.87. Positive momentum is decelerating as the MACD (moving average convergence divergence) histogram is printing in the black with a declining trajectory which points to consolidation. The fast stochastic is oversold printing a reading of 13, which is below the oversold trigger level of 20 and could foreshadow a correction.

Inventories Are Sliding

U.S. liquefied natural gas exports set two consecutive monthly records in November and December 2018, with 32 and 36 exported cargoes, respectively, according to the EIA. Two new liquefaction trains Sabine Pass Train 5 and Corpus Christi Train 1 began LNG production in late November. EIA estimates that U.S. LNG exports averaged 3.6 billion cubic feet per day in November and 3.9 in December

Net withdrawals from storage totaled 81 Bcf for the week ending January 11, compared with the five-year average net withdrawals of 218 Bcf and last year’s net withdrawals of 208 Bcf during the same week. Working gas stocks totaled 2,533 Bcf, which is 327 Bcf lower than the five-year average and 77 Bcf lower than last year at this time