Natural Gas Price Prediction – Prices Rally Ahead of Inventory Release

Natural gas prices rallied nearly 1.7% on Wednesday ahead of Thursday’s inventory report from the Department of energy. Expectations are for a 110 Bcf build according to Estimize. Last week, inventories increased 92 Bcf in line with expectations. The weather remains colder than normal in the mid-west and hotter than normal in the south east buoy both cooling and heating demand. Supply remains flat and demand has been subdued which has helped put downward pressure on prices.

Technical Analysis

Natural gas prices rallied on Wednesday, generating an outside day. This is a higher high and a higher close along with a lower low. Prices are poised to test resistance near the April highs at 2.72. Support is seen near the 10-day moving average at 2.53. Short-term momentum has turned positive fast stochastic continues to accelerat higher. The current reading on the fast stochastic is 65, which is in the upper portion of the neutral range. The MACD (moving average convergence 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.

Supply remains flat, according to data from the EIA. The average total supply of natural gas remained the same as in the previous report week, averaging 94.9 Bcf per day. Dry natural gas production remained constant week over week. Average net imports from Canada decreased by 4% from last week. Demand falls as temperatures moderate. Total U.S. consumption of natural gas fell by 7% compared with the previous report week, according to data from the EIA. In the residential and commercial sectors, consumption declined by 21% as warmer temperatures reduced natural gas demand for space heating. Natural gas consumed for power generation declined by 1% week over week. Industrial sector consumption decreased by 1% week over week. Natural gas exports to Mexico decreased 11%.