Natural Gas Price Prediction – Prices Drop on Unexpected Inventory Build

Natural gas prices dropped on Thursday following a larger than expected build in inventories for the last week of the withdrawal season. Inventories were expected to decline by 1 Bcf according to Estimize. Warmer than normal weather is expected to cover most of the United States for the next 8-14 days. This should reduce heating demand. Cooling demand is not expected to pick up until June of this year, which generally allows inventories to build.

Technical Analysis

Natural gas prices dropped on Thursday making a lower low and continuing to form a down trend. Support is seen near the February lows at 2.54. Resistance on natural gas is seen near the 10-day moving average at 2.705. Momentum has turned negative as the MACD (moving average convergence divergence) index generated a crossover sell signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses below the MACD signal line (the 9-day moving average of the MACD line). The MACD histogram is printing in the red with a downward sloping trajectory which points to lower prices and accelerating negative momentum. Short term momentum is negative. The current reading on the fast stochastic is 2.7, well below the oversold trigger level of 20 and could foreshadow a correction.

EIA Reports Gas inventories Rose More than Expected

The Energy Information Administration reported on Thursday that working gas in storage was 1,130 Bcf as of Friday, March 29, 2019, according to EIA estimates. This represents a net increase of 23 Bcf from the previous week. Expectations had been for a very small draw. Stocks were 228 Bcf less than last year at this time and 505 Bcf below the five-year average of 1,635 Bcf. At 1,130 Bcf, total working gas is within the five-year historical range. Despite the low levels of stock piles, production continue to increase at an accelerating pace.