Natural Gas Price Prediction – Prices Rebound Following Inventory Draw

Natural gas prices moved higher on Thursday, rising following a slightly larger than expected draw in natural gas inventories.  The final inventory estimate from Estimize was 140 Bcf, and Thursday’s decline of 149 BCF took stockpiles down to the lower end of the average range for this time of year. Inventories are well below the 5-year average range, but prices are below the 5-year average range. This is mainly because production remain at elevated levels. The weather is expected to be colder than normal through out the west and mid-west, but warmer than normal throughout most of the east coast during the next 2-weeks. The colder than normal weather will buoy prices in California and Chicago, but the NYMEX contract is in Henry Hub Louisiana, which will not see a spike due to colder than normal weather.

Technical Analysis

Natural gas prices rebounded on Thursday, bouncing off support near the 10-day moving average at 2.83. Resistance is seen near former support at 2.87, and then the February highs at 2.91. Positive momentum is decelerating as the MACD (moving average convergence divergence) histogram is printing in the black with a declining trajectory which points to consolidation. The fast stochastic is whipsawing in overbought territory. The current reading on the fast stochastic is 87, above the overbought trigger level of 80 which could foreshadow a correction.

Natural Gas Inventories Decline More than Expected

The Department of Energy on Thursday reported that working gas in storage was 1,390 Bcf as of Friday, March 1, 2019. This represents a net decrease of 149 Bcf from the previous week. Expectations according to Estimize were that natural gas stockpiles would decline by 140 Bcf. Stocks were 243 Bcf less than last year at this time and 464 Bcf below the five-year average of 1,854 Bcf. The 5-year average price of natural gas is $3.12, which puts current prices well below the 5-year average price for this time of year. At 1,390 Bcf, total working gas is within the five-year historical range.