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David Becker

Natural gas prices dropped nearly 3% on Friday as inventories built more than expected. Strong production despite continued declines in rig count, has kept natural gas prices on their heels. The weather is expected to remain warmer than normal for most of the United States which should increase cooling demand. Softer than expected Durable goods order likely reduced natural gas demand. Orders for durable goods, plunged 17.2% in April after dropping 16.6% in March.

Technical Analysis

Natural gas prices dropped on Thursday declining nearly 3% but bouncing near support which is an upward sloping trend line that comes in near 1.82. A close below this level would likely see a decline to the June contract lows at 1.60. Resistance on natural gas is seen near the 10-day moving average of 1.89. The 10-day moving average recently crossed below the 50-day moving average which means that a short term downtrend is now in place. Short term momentum is negative as the fast stochastic generated a crossover sell signal. The current reading of the fast stochastic is 5, well below the oversold trigger level of 20 which could foreshadow a correction.

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Inventories Rise More than Expected

Natural gas in storage was 2,612 Bcf as of Friday, May 22, 2020, according to the EIA. This represents a net increase of 109 Bcf from the previous week. Expectations were for a 107 Bcf build according to survey provider Estimize. Stocks were 778 Bcf higher than last year at this time and 423 Bcf above the five-year average of 2,189 Bcf. At 2,612 Bcf, total working gas is within the five-year historical range.

For a look at all of today’s economic events, check out our economic calendar.

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