Natural Gas Price Prediction – Prices Surge on Lower than Expected Inventories

Natural gas prices surged higher on Thursday but settled off the highs of the session. Prices where buoyed by a smaller than expected build in natural gas inventories. Inventories increased by 46 Bcf nearly 50% less than what was expected. In addition, the trajectory of inventories will now make it very tough to make up what is needed before the withdrawal season at the end of October.  The weather is forecast to be colder than normal throughout most of the Mid-west for the next 2-weeks which should drive up heating demand. NOAA is also reported that tropical storm Kurt is making its way into the Caribbean see with the potential to move upward into the Gulf of Mexico where it could cause issue for natural gas installations.

Technical Analysis

Natural gas prices surged higher rising approximately 0.9% but came off session highs as it hit resistance near the 50% Fibonacci retracement level near 3.09. Short-term support is seen near the June highs at 3.05. Momentum remains positive as the MACD (moving average convergence divergence) histogram prints in the black with an upward sloping trajectory which points to higher prices. Additional support is seen near the 10-day moving average near 2.96.

Inventories Come in Lower than Expected

The Energy Information Administration reports that working gas in storage was 2,768 Bcf as of Friday, September 21, 2018. This represents a net increase of 46 Bcf from the previous week. Expectation were for a 66 Bcf increase. Stocks were 690 Bcf less than last year at this time and 621 Bcf below the five-year average of 3,389 Bcf. At 2,768 Bcf, total working gas is below the five-year historical range. The trajectory is also alarming which could put prices on a path higher. The ridge trough pattern will likely bring colder than normal weather into the US for the next month.