Natural Gas Price Prediction – Prices Drop Despite Robust Inventory Draw

Natural gas prices moved lower on Thursday despite a larger than expected draw in natural gas inventories. Colder than normal weather is making its way across the western portion of the United States which could make January a colder than normal month.

Technical Analysis

Natural gas prices moved lower on Thursday pushing toward support near an upward sloping trend line that connects the low in September to the low in October and comes in near 3.51. Resistance is seen near the 10-day moving average at 4.02. Momentum is negative as the MACD (moving average convergence divergence) histogram prints in the red with a declining trajectory which points to lower prices. The fast stochastic is also moving lower, which reflects accelerating negative momentum. The current reading on the fast stochastic is 9, below the oversold trigger level of 20 which could foreshadow a correction.

Inventories Dropped More than Expected

The EIA reported that working gas in storage was 2,773 Bcf as of Friday, December 14, 2018. This represents a net decrease of 141 Bcf from the previous week. Expectations were for a decline of 132 Bcf according to Estimize. Stocks were 697 Bcf less than last year at this time and 720 Bcf below the five-year average of 3,493 Bcf. At 2,773 Bcf, total working gas is below the five-year historical range. Prices continue to hover well below the 5-year high of 6.92 per MMBTu.

Manufacturing Dropped in Philadelphia

The Philadelphia Federal Reserve reported that business conditions index fell to a reading of 9.4 in December. That was the lowest level since August 2016 and followed a reading of 12.9 in November. Manufacturing had been on an upswing despite thoughts that economic conditions where on the decline and this is the first of a number of manufacturing reports that are forward looking that might show the US economy is beginning to falter.