Natural Gas Price Prediction – Prices Drop on Higher Production Forecast

Natural gas prices tumbled on Thursday despite a smaller than expected build reported by the Department of Energy on Thursday. Stronger future production forecast by the Energy Information Administration in their Short-term Energy outlook put downward pressure on prices. The weather is expected to be normal over the next 2-weeks which will likely have a limited affect on the price of natural gas. At the beginning of the Hurricane season there are current no active storms in the Atlantic.

Technical Analysis

Natural gas prices dropped sharply on Thursday, declining 2.6% and poised to test the June lows at 2.305. A close below this level would put prices on a path to test the 2016 lows at 1.91. Short term momentum has turned negative as the fast stochastic generated a crossover sell-signal. The only caveat is that the current reading on the fast stochastic is 5, well below the oversold trigger level of 20 which could foreshadow a correction. Medium term momentum is neutral to negative as the MACD (moving average convergence divergence) is printing in the red with a downward sloping trajectory which points to lower prices.

Inventories Rose Less than Expected

Natural gas inventories rose more than expected according to a report from the EIA. working gas in storage was 2,088 Bcf as of Friday, June 7, 2019. This represents a net increase of 102 Bcf from the previous week. Expectations were for inventories to rise by 114 Bcf.  Stocks were 189 Bcf higher than last year at this time and 230 Bcf below the five-year average of 2,318 Bcf. At 2,088 Bcf, total working gas is within the five-year historical range. EIA forecasts that U.S. dry natural gas production will average 90.6 billion cubic feet per day (Bcf per day) in 2019, up 7.2 Bcf per day from 2018. EIA expects natural gas production will continue to grow in 2020, albeit at a slower rate, averaging 91.8 Bcf per day next year.