Natural Gas Price Prediction – Prices Move Higher Following Inventory Draw

Natural gas prices edged higher on Thursday following an inline inventory report from the Department of Energy. Prices are within the 5-year average range, but the lower end. The 5-year average price is 3.04, nearly 20 cents lower than current levels. Production remains robust. The weather is expected to be colder than normal over the next 2-weeks. The 8-14 day forecast is not as cold as the 6-10 day forecast. Stronger than expected manufacturing data could give demand a boost.

Technical Analysis

Natural gas prices moved higher on Thursday rising approximately 0.5%. Resistance is seen near former support at 2.87. Support is seen near the 10-day moving average at 2.72. Momentum remains positive as the MACD (moving average convergence divergence) histogram is printing in the black with an upward sloping trajectory which points to higher prices. The fast stochast is hovering near the upper end of the neutral range after recently generating a crossover sell signal.

Inventories Dropped in Line with Expectations

Natural gas inventories declined in line with expectations. According to the EIA, working gas in storage was 1,539 Bcf as of Friday, February 22, 2019. This represents a net decrease of 166 Bcf from the previous week. Expectations were for a 162 Bcf decline. Stocks were 154 Bcf less than last year at this time and 424 Bcf below the five-year average of 1,963 Bcf. At 1,539 Bcf, total working gas is within the five-year historical range. The 5-year average price for natural gas is 3.04, 7% below current levels.

Chicago Purchasing Managers Index Surges

The Chicago PMI surged 8 points to 64.7 in February, according to the ISM. That’s the largest monthly rise since February 2017. The new orders component rose 15.2 points. This points to an increase in manufacturing in the coming months. The Chicago PMI is generally a considered a solid barometer of the Nation PMI number which will be released by the Institute of Supply Management on Friday.