Natural Gas Price Prediction – Prices Rise as Inventories Climb Less than Expected

Natural gas prices moved higher on Thursday following a lower than expected increase in natural gas inventories.  This was somewhat offset by a weaker than expected durable goods orders ahead of Friday’s U.S. GDP report.  With manufacturing somewhat on the rise in the U.S. and strong economic growth gaining a toe hold, prices of natural gas are getting a boost from higher demand from manufacturing which is helping to replace the decline in power generation. The weather is expected to be cooler than normal in the mid-west but the west is expected to remain warm.

Prices are poised to test target resistance near the 50-day moving average at 2.874.  Support is seen near the 10-day moving average at 2.75.  Momentum on natural gas prices has turned positive as the MACD (moving average convergence divergence) index generated a crossover buy signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses above the MACD signal line (the 9-day moving average of the MACD line).

Inventories Rose Less than Expected

Working gas in storage was 2,273 Bcf as of Friday, July 20, 2018, according to EIA estimates. This represents a net increase of 24 Bcf from the previous week. Expectations were for an increase of 40 Bcf. Stocks were 705 Bcf less than last year at this time and 557 Bcf below the five-year average of 2,830 Bcf. At 2,273 Bcf, total working gas is within the five-year historical range.

U.S. durable goods orders rebounded 1.0% in June following the 0.3% decline in May which was revised from -0.4% and the 1.0% drop in April, breaking 2 months of declines. Transportation orders bounced 2.2% from -1.4% which was revised from -1.0%. Excluding transportation, orders were up 0.4% versus 0.3%. Non-defense capital goods orders ex-aircraft increased 0.6% from 0.7%. Shipments surged 1.7% from 0.2% and were 1.0% higher for the non-defense capital goods orders ex-aircraft component, from 0.2%. Inventories dipped 0.1% from 0.3%. The inventory-shipment ratio slipped to 1.60 from 1.63.