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David Becker
Natural Gas

Natural gas prices tumbled on Thursday continuing its downtrend following a larger than expected rise in natural gas inventories reported by the Department of Energy. The tractor of inventory increases has been substantial as the weather has remained milder than normal for this time of year which has weighed on cooling demand. This comes as production continues to rise and accelerate according to the EIA.

Technical Analysis

Natural gas prices tumbled on Thursday falling nearly 3.5%, following a larger than expected drop in natural gas inventories. Prices are now poised to test the May 2016 lows at 1.91 and then the 2016 lows at 1.61. Prices are oversold. The RSI (relative strength index) which is a momentum oscillator that measures overbought and oversold levels as well as accelerating and decelerating momentum, is printing a reading of 29, below the oversold trigger level of 30 which could foreshadow a correction. The fast stochastic is printing a reading of 14, below the oversold trigger level of 20 which also could foreshadow a correction. The MACD histogram is printing in the red with a downward sloping trajectory which points to lower prices.

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Inventories Rose More than Expected

The Energy Information Administration reported on Thursday that working gas in storage was 2,203 Bcf as of Friday, June 14, 2019. This the rise represents a net increase of 115 Bcf from the previous week. Expectations were for a 104 Bcf increase in natural gas stockpiles according to Estimize. Stocks were 209 Bcf higher than last year at this time and 199 Bcf below the five-year average of 2,402 Bcf. At 2,203 Bcf, total working gas is within the five-year historical range. Despite stockpiles being below the 5-year average range, the trajectory is pointing to rising inventories, and with production continuing to rise at a rapid pace, inventories are expected to soon eclipse the 5-year average.

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