Natural Gas Price Prediction – Prices Rebound on Inline Inventory Report

Natural gas prices rebounded on Thursday following the weekly inventory report released by the Department of energy. The release showed that stockpiles increased by 103 Bcf in line with expectations. The weather is expected to be warmer than normal over the next 6-10 and 8-14 days which should keep inventory withdrawals at the average rate. All eyes will be on Friday’s rig count data. While expectations are for only a 1-natural gas rig decline, the oil numbers will be more pertinent. Oil rig counts have dropped below the 2016 lows, which should spill over as natural gas production will decline if oil rigs are removed.

Technical Analysis

Natural gas prices rebounded on Thursday rising 3.7%. Support is seen near the June contract lows at 1.60. Resistance is seen near the 10-day moving average at 1.85. The 10-day moving average has crossed below the 50-day moving average which means that a short-term downtrend is now in place. Short term momentum has turned positive as the fast stochastic generated a crossover buy signal in oversold territory. The current reading on the fast stochastic is 15, below the oversold trigger level of 20 which could foreshadow a correction. Medium-term momentum is negative as the MACD (moving average convergence divergence) histogram prints in the red with a downward sloping trajectory which points to lower prices.

Inventories Rise in Line with Expectations

The EIA reported that natural gas in storage was 2,422 Bcf as of Friday, May 8, 2020. This represents a net increase of 103 Bcf from the previous week. Expectations were for a 103 Bcd build according to survey provider Estimize. Stocks were 799 Bcf higher than last year at this time and 413 Bcf above the five-year average of 2,009 Bcf. At 2,422 Bcf, the total working gas is within the five-year historical range.