Natural Gas Price Prediction – Prices Slip on Higher than Expected Inventory Build

Natural gas prices were nearly unchanged as prices were unable to move above resistance near the Fibonacci retracement of the decline in prices from January to February at 2.96. Prices have found support near the 10-day moving average at 2.93. A larger than expected build in natural gas inventories weighed on prices. Momentum is neutral as the MACD (moving average convergence divergence) histogram prints near the zero-index level with a flat trajectory which reflects consolidation.

Inventories Rose More than Expected

Working gas in storage was 1,913 Bcf as of Friday, June 8, 2018, according to EIA estimates. This represents a net increase of 96 Bcf from the previous week, more than the 87 Bcf rise expected. Stocks were 785 Bcf less than last year at this time and 507 Bcf below the five-year average of 2,420 Bcf. At 1,913 Bcf, total working gas is within the five-year historical range.

U.S. dry natural gas production averaged 73.6 billion cubic feet per day (Bcf/d) in 2017. EIA forecasts dry natural gas production will average 81.2 Bcf/d in 2018, establishing a new record. EIA expects natural gas production will rise again in 2019 to 83.8 Bcf/d.

LNG Exports are On the Rise

Growing forecast U.S. natural gas production supports increasing forecast liquefied natural gas (LNG) exports. LNG exports averaged 1.9 Bcf/d in 2017. EIA forecasts LNG exports to average 3.0 Bcf/d in 2018 and 5.1 Bcf/d in 2019. Dominion Energy’s Cove Point LNG facility is ramping up exports. In April, the facility exported an estimated 13.4 Bcf, implying baseload utilization of 65%, and in May, it exported an estimated 23.5 Bcf, implying baseload utilization of 94%.

U.S. import and export prices rose

U.S. import and export prices rose 0.6% in May. The 0.3% increase in April import prices was revised to 0.6% while the 0.6% export price gain was not revised. On A 12-month basis, import prices are 4.3% year over year versus 3.6% year over year, with export prices accelerating to 4.9% year over year versus 3.7% year over year. For import prices, petroleum increased 5.9% versus the 4.4% bounce in April. Excluding petroleum, import prices edged up 0.1%, the same as in April. Industrial supplies prices jumped 2.5% after the prior 2.1% gain. Import prices with China were 0.1% higher from -0.1% previously. Import prices with Canada increased 1.9% from 1.5% previously. For export prices, agricultural goods rebounded 1.6% from April’s 1.2% drop. Excluding ag, export prices were 0.5% higher from -0.7%.