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

Natural gas prices were down on the session, but rebound from session lows following a larger than expected build in stockpiles reported by the Energy Information Administration. The weather in the mid-west and east coast of the United States is expected to be warmer than normal for the next 6-10 and 8-14 day forecast according to the National Oceanic Atmospheric Administration.  NOAA is also showing that a cyclone disturbance with a 60% chance of becoming a tropic storm has moved off the coast of Africa into the Atlantic Ocean. This storm is the first that might have the potential to make its way across the Ocean into the Gulf of Mexico

Technical Analysis

Natural gas prices made a lower low and a lower high which is a sign of a downtrend.  Prices decline by 0.35% on Thursday. Support is seen near the 50-day moving average at 2.86. Resistance is seen near the 20-day moving average at 2.92. Momentum is negative to neutral as the MACD (moving average convergence divergence) histogram prints in the red with a flat trajectory which points to consolidation. The relative strength index is printing a reading of 48, which is in the middle of the neutral range and also reflects consolidation.

Natural Gas Inventories Grew More than Expected

The Energy Information Administration on Thursday reported that working gas in storage was 2,505 Bcf as of Friday, August 24, 2018. This represents a net increase of 70 Bcf from the previous week. The compares to expectations that inventories would rise by 57 Bcf according to Estimize.  Stocks were 646 Bcf less than last year at this time and 588 Bcf below the five-year average of 3,093 Bcf. At 2,505 Bcf, total working gas is below the five-year historical range. The 5-year average price is $3.14 per mmbtu nearly 10% higher than the current price level. This means prices could rise 10% and still be undervalued relative to the 5-year average range.