Natural Gas Price Prediction – Prices Rise Despite Large Inventory Build

Natural gas prices rebounded sharply, generating an outside day on Thursday despite a larger than expected build in natural gas inventories according to a report released by the Department of Energy. The weather is expected to be normal over the next 8-14 days which should reduce any cooling or heating demand. There is one disturbance in the Gulf of Mexico that NOAA gives a 0% chance of becoming a tropical storm over the next 48-hours.

Technical Analysis

Natural gas prices whipsawed, forming an outside day, and close near the highs of the session. An outside day is generally considered a reversal day. This occurs when there is a lower low a higher high and a higher close. Prices snapped back above the breakdown level which was an upward sloping trend line that comes in near 2.30. Resistance is now seen near the 10-day moving average at 2.42. Short term momentum has turned positive as the fast stochastic generated a crossover buy signal in oversold territory. The fast stochastic has now moved out of oversold territory which points to accelerating positive momentum. Medium-term negative momentum is decelerating as the MACD (moving average convergence divergence) histogram is printing in the red with a flattening trajectory which points to consolidation.

Inventories Rose More than Expected

Natural gas prices rallied despite a larger than expected build in stockpiles. According to the EIA, working gas in storage was 3,317 Bcf as of Friday, September 27, 2019. This represents a net increase of 112 Bcf from the previous week. Expectations were for a 95 Bcf build according to survey provider Estimize. Stocks were 465 Bcf higher than last year at this time and 18 Bcf below the five-year average of 3,335 Bcf. At 3,317 Bcf, total working gas is within the five-year historical range.