Natural Gas Price Prediction – Prices Drop Giving Back Thursday’s Gains

Natural gas prices moved lower on Friday and continue to whipsaw following Thursday’s lower than expected build in inventories which was reported by the Department of Energy. Inventories are well below the 5-year average range. The range in prices during the past 5-years is 6.49 to 1.61, and current levels are slightly below the 5-year average price which is 3.12.  Despite the robust pace of production in the US, domestic demand and LNG imports are eating up spare capacity.

Technical Analysis

Natural gas prices whipsawed on Friday forming an inside day which is a higher low and a lower high which is a sign of indecision. Prices found support near the 10-day moving average at 2.98.  Resistance is seen near a 50% Fibonacci retracement level at 3.09. 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.

Supply is Flat

The EIA reported that overall supply is flat with production increases offsetting import declines. The average total supply of natural gas remained the same as in the previous report week, averaging 89.2 Bcf per day. Dry natural gas production grew by 1% compared with the previous report week, averaging 84.4 Bcf per day. Average net imports from Canada decreased by 2% from last week.

Demand Declined

Total U.S. consumption of natural gas fell by 2% compared with the previous report week, according to data from the EIA. Natural gas consumed for power generation declined by 10% week over week with cooler weather moving in this week. Industrial sector consumption increased by 2% week over week, while combined residential and commercial sector consumption increased by 22%. Natural gas exports to Mexico decreased 2%.

LNG Exports Where Unchanged

U.S. LNG exports are flat week over week. Five LNG vessels with a combined LNG-carrying capacity of 18.4 Bcf departed the United States from September 20 through September 26.