Natural Gas Price Prediction – Prices Slide on Warm Weather Forecast Ahead of Inventory Report

Natural gas prices moved lower on Wednesday as prices continue to break down. Warmer than normal weather is expected for the next 6-10 and 8-14 days according to the National Oceanic Atmospheric Administration. The warm weather is expected to weigh on heating degress days ahead of the end of the withdrawal season. Market particpants now await the Department of Energy’s inventory report. Stocks are estimated to decline by 51 Bcf according to Estimize. This compares to last weeks decline in stockpiles by 47 Bcf.

Technical Analysis

Prices continue to break down making a lower low and a lower high. Resistdance is seen near the 10-day moving average at 2.79. Support is seen near the February lows at 2.54. 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 below the MACD signal line (the 9-day moving average of the MACD line). The MACD histogram is printing in the red with a downward sloping trajectory which points to lower prices and accelerating positive momentum. The fast stochastic continued to move lower, which reflects accelerating short term momentum. The current reading on the fast stochastic is 8.8, well below the oversold trigger level of 20 which could foreshadow a correction in prices.

Inventories are 3% Lowe than the 5-Year Average

The average rate of net withdrawals from storage is 3% lower than the five-year average so far in the withdrawal season according to the Energy Information ADministration. If the rate of withdrawals from storage matched the five-year average of 3.9 Bcf per day for the remainder of the withdrawal season, total inventories would be 1,080 Bcf on March 31, which is 556 Bcf lower than the five-year average of 1,636 Bcf for that time of year. Its surprising that inventories are lower than the 5-year average but prices are well below the 5-year average. The only reason that this would be the case is that traders believe that production will continue to rise quickly increasing inventories.