Natural Gas Price Prediction – Prices Form Inside Day Following Inventory Report

David Becker
Natural Gas

Natural gas prices moved higher on Thursday but traded well off its highs following the inventory report. The price was up early on colder than normal weather which is forecast to cover most of the United States for the next 8-14 days. Inventory levels decline more than expected according to the Bloomberg survey but where less than expected according to Estimize.  The trajectory of the declines have slowed and current level are now very close to the bottom of the 5-year range for this time of year.

Technical Analysis

Natural gas prices formed an inside day closing higher. An inside day is a lower high and a higher low which generally reflects indecision. There is a wide bull flag pattern which is a pause that refreshes higher. Momentum has turned positive as the MACD (moving average convergence divergence) index generated a crossover buy signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses above the MACD signal line (the 9-day moving average of the MACD line). The MACD histogram is printing in the black with an upward sloping trajectory which point to accelerating positive momentum.


Inventories Declined but are Now in the 5-Year Average Range

The Energy Information Administration reported that working gas in storage was 2,533 Bcf as of Friday, January 11, 2019. This represents a net decrease of 81 Bcf from the previous week. Estimize has predicted a decline of 91 Bcf. Stocks were 77 Bcf less than last year at this time and 327 Bcf below the five-year average of 2,860 Bcf. At 2,533 Bcf, total working gas is within the five-year historical range. The trajectory of the declines has also been slowing, but the cold weather that is predicted over the next 2-weeks could bring inventory levels back below the lower end of the 5-year average range during the winter.

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