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David Becker
Crude Oil daily chart, April 22, 2019

Natural gas prices made a dead cat bounce on Wednesday ahead of Thursday’s inventory report from the Department of Energy. Expectations are for a 90 Bcf increase in stockpiles according to Estimize. This follows at 92 Bcf increase in natural gas inventories last week, which was approximately 20 Bcf higher than expectations. Warmer than normal weather is expected to cover most of the east coast for the next 8-14 days reducing any additional cooling demand.

Technical Analysis

Natural gas prices traded sideways moving slightly higher on Wednesday, following Tuesday’s drop. Prices appear to be forming a bear flag pattern after breaking down last week below support near the 2.54. Short term resistance is seen near the 10-day moving average at 2.56. Support is seen near the 2016 lows at 1.65.  Short term momentum has turned positive as the fast stochastic generated a crossover buy signal. The signal occurred as the fast stochastic is printing a reading of 5, which is well below the oversold trigger level of 20 on the fast stochastic which could foreshadow a correction. Medium term negative momentum is negative as the MACD (moving average convergence divergence) histogram is printing in the red with a downward sloping trajectory which points to lower prices.

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The EIA Forecast Higher Production

The EIA forecasts that dry natural gas production will average 91.0 billion cubic feet per day in 2019, up 7.6 Bcf per day from 2018. EIA expects natural gas production will continue to grow in 2020 to an average of 92.5 Bcf per day. EIA estimates that natural gas inventories ended March at 1.2 trillion cubic feet which would be 17% lower than levels from a year earlier and 30% lower than the five-year average. EIA forecasts that natural gas storage injections will outpace the previous five-year average during the April-through-October injection season and that inventories will reach 3.7 Tcf at the end of October, which would be 13% higher than October 2018 levels but 1% lower than the five-year average.

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