Natural Gas Price Prediction – Prices Rebound but Stall Following Larger than Expected Inventory Build

Natural gas prices rebounded but remain range bound following Thursday’s higher than expected build in inventories. Despite the uptick, inventories remain well below the 5-year average, just 1-week before the withdrawal season begins. Generally inventories begin to come out of storage on November 1, unless the weather is warmer than normal. The weather is expected to be slightly below normal for most of the mid-west for the next 2-weeks according to the National Oceanic Atmospheric Administration. A stronger than expected durable goods orders should help industrial natural gas demand remain buoyed.

Technical Analysis

Natural gas prices whipsawed higher but remain range bound hovering near the 10-day moving average at 3.21. Additional resistance is seen near a downward sloping trend line that comes in near 3.35. Support is seen near the 50-day moving average at 3.02. Momentum remains negative as the MACD (moving average convergence divergence) histogram prints in the red with a declining trajectory which points to lower prices.

The Energy Information Administration reported that working gas in storage was 3,095 Bcf as of Friday, October 19, 2018. This represents a net increase of 58 Bcf from the previous week. Expectations were for a 52 Bcf Increase. Stocks were 606 Bcf less than last year at this time and 624 Bcf below the five-year average of 3,719 Bcf. At 3,095 Bcf, total working gas is below the five-year historical range.

Durable Goods Order Remain Buoyed

US Durable Good order increased slightly according to a report from the US Commerce Department Order increased by 0.8% September, a sharp slowdown from a 4.6% jump in August. The swing was heavily influenced by the volatile aircraft category, which fell 17.5% in September after having surged 63.7% August. Business investment dipped 0.1% in September following a 0.2% fall in August. The recent weakness in investment orders has raised concerns about whether a growing trade war with China and stock market volatility were making businesses more cautious.