Natural Gas Price Prediction – Prices Slide Despite Cold Weather

Natural gas prices moved lower on Wednesday ahead of Thursday inventory reported from the Department of Energy.
David Becker
Natural gas daily chart, January 30, 2019

Expectations are for natural gas inventories to decline by 176 Bcf according to Estimize. The weather is expected to be colder than normal for the next 8-14 days across the mid-west but that will come after a warm front that follows the current colder than normal weather. Next week there is the possibility that inventories decline by more than 200 Bcf following the record negative temperatures in the mid-west. One Minnesota town had temperatures below -40 degrees below F. The Fed left rates unchanged and had dovish commentary which should buoy commodity prices.

Technical Analysis

Natural gas prices moved lower but held above support near an upward sloping trend line that comes in near 2.87. Resistance is seen near the 10-day moving average at 3.13. Momentum has turned negative as the MACD (moving average convergence divergence index generated a crossover sell 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). The MACD histogram is printing in the red with a declining trajectory which points to lower prices.

The Fed kept interest rates unchanged as the committee focused on the Fed fund rates and the balance sheet. In essence the Fed said that they were in wait and see mode, but the risks are no longer tilted in favor of additional rate hikes. The Fed appears to have capitulated to the markets, and will make decision as they go along. No longer will the balance sheet be on autopilot. The Fed said that they had ample reserves on their balance sheet which means that they could be done with running it off. The Fed also said they would be patient and would be diligent about the runoff in their balance sheet. Yields tumbled on the news, which could buoy commodity prices.

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