Natural Gas Price Prediction – Prices Move Higher Following Robust Inventory Draw

Natural gas prices moved sideways on Thursday following a larger than expected draw in natural gas inventories.
David Becker

The weather continues to forecast warmer than normal temperatures throughout the United States which are creating headwinds.  A trade deal with China could be beneficial to price action as it will increase the demand for LNG and put a floor under natural gas prices.

Technical Analysis

Natural gas prices moved sideways on Thursday and continue to form a bear flag pattern. This is generally a pause that refreshes lower.  Prices have been holding just above support near a long term moving average at 2.90. Resistance on natural gas is seen near the 20-day moving average at 3.41. The 20-day moving average recently crossed below the 50-day moving average which means a medium-term downtrend is in place.  Negative momentum is decelerating as the MACD (moving average convergence divergence) histogram is printing in the red with a rising trajectory. The fast stochastic generated a crossover buy signal, in oversold territory which reflects accelerating positive momentum. The current reading of 11, on the fast stochastic, is below the oversold trigger level of 20 and could foreshadow a correction in natural gas prices.

Inventories Declined More than Expected

The EIA reported that working gas in storage was 2,614 Bcf as of Friday, January 4, 2019. This represents a net decrease of 91 Bcf from the previous week, compared to expectations that inventories would decline by 68 Bcf according to Estimize. Stocks were 204 Bcf less than last year at this time and 464 Bcf below the five-year average of 3,078 Bcf. At 2,614 Bcf, the total working gas is below the five-year historical range. Reclassifications from working gas to base gas resulted in decreased working gas stocks of approximately 4 Bcf in the Mountain region for the week ending January 4, 2019. The implied flow for the week is a decrease of 87 Bcf to Lower 48 working gas stocks.

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