Natural Gas Price Prediction – Prices Rebound Ahead of Inventory Data

 

Natural gas prices moved higher on Wednesday ahead of Thursday’s inventory report from the Department of Energy. Expectations are that inventories will rise by 57 Bcf according to Estimize. This would put inventories below the 5-year average range, which undervalues prices given the historical 5-year average level is 3.14.  Warmer than normal weather is expected to cover most of the United States for the next 2-weeks with oppressive weather covering most of the north east for the next 6-10 days.

Technical Analysis

Prices rebounded but where unable to pierce through resistance near the 50-day moving average at 2.86. Additional resistance is seen near the 20-day moving average at 2.92. Momentum has turned negative as the MACD (moving average convergence divergence) index generated a crossover sell signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses below the MACD signal line (the 9-day moving average of the MACD line). The MACD histogram is printing in the red with a downward sloping trajectory which points to lower prices.

Supply is Strong

Supply rises as production growth continues. According to data from the EIA, the average total supply of natural gas rose by 1% compared with the previous report week. Dry natural gas production grew by 1% compared with the previous report week and averaged 82.6 Bcf per day, 14% higher than last year at this time. Average net imports from Canada decreased by 3% from last week.

 

Demand falls

Total U.S. consumption of natural gas fell by 1% compared with the previous report week, according to data from the EIA. Natural gas consumed for power generation declined by 3% week over week. Industrial sector consumption stayed constant, averaging 19.8 Bcf per day. In the residential and commercial sectors, consumption increased by 9% as significantly cooler-than-normal temperatures occurred in the northwest Great Plains. Temperatures below 60° Fahrenheit in parts of Montana, Wyoming, Colorado, Nebraska, and the Dakotas likely increased heating demand in the region. Residential and commercial consumption remains a relatively minor contribution to total demand during the summer months. Natural gas exports to Mexico decreased 2%