Natural Gas Price Prediction – Prices Hover Near Resistance Ahead of EIA Inventory Report

Natural gas prices consolidated mid-week, ahead of Thursday’s inventory report. The weather is forecast to be warmer than normal over the next 8-14 days which could buoy cooling demand. The EIA reported that both production and consumption grew significantly year over year through the first half of 2018. Prices are hovering near an upward sloping trend line that comes in near 2.87, which is seen as short-term resistance. Support is seen near the May lows at 2.70. Momentum is mixed. The MACD (moving average convergence divergence) histogram is printing in the red with a downward sloping trajectory which points to negative momentum. The fast stochastic has generated a crossover buy signal in oversold territory which points to accelerating positive momentum.

Natural gas supply and consumption have grown significantly

Natural gas supply and consumption have grown significantly from the first half of 2017 through the first half of 2018. According to data from the EIA, total natural gas consumption in the Lower 48 states averaged 87.4 billion cubic feet per day during the first half of 2018, which is 11% greater than during the first half of 2017. The total supply of natural gas averaged 84.8 Bcf/d during the first half of 2018, a 7.8 Bcf/d year-on-year change.

The increase in natural gas supply was driven by dry production

The increase in natural gas supply was driven by dry production, which rose 10% from the same period last year. Production increases were facilitated by the additional pipeline capacity brought into service since June 2017, including the Leach XPress, the Rover Pipeline, and Phase 1 of Atlantic Sunrise. Net pipeline imports from Canada increased slightly, likely related to the colder weather.

Overall, consumption increased 0.7 Bcf/d more than supply. This market tightening was reflected in the large storage withdrawals this year and the current low levels of natural gas in storage relative to the five-year average.