Natural Gas Price Prediction – Prices Trade Sideways Despite Frigid Mid-west Weather

Natural gas prices moved sideways on Monday, falling slightly, and continuing to attempt to form a bottom. Prices are undervalued relative to the 5-year average range for this time of year. The weather is expected to remain colder than normal for the next 6-10 days. The 8-14 day forecast shows that the weather will become cooler than normal in the west coast and warmer than normal through the east coast. Inventories of natural gas in southern California have tumbled due to record cold weather in the west. The natural gas contract that is actively traded is at the Henry Hub in Louisiana.

Technical Analysis

Natural gas prices traded sideways on Monday. Prices are having a difficult time moving higher despite record cold weather across the mid-west. The weather in Chicago one of the largest urban populations was minus 3 F on Monday. Prices are having a difficult time pushing through resistance which is former support near 2.87. Support is seen near the 10-day moving average at 2.77. 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.

Socal Inventories Drop

Natural gas storage inventories in Southern California decreased from 57.7 billion cubic feet according to the EIA, a 31% reduction. In comparison, Southern California storage volumes decreased by only 7.5 Bcf in all of February 2018. The 2019 storage decrease was chiefly a result of high natural gas demand in Southern California caused by colder-than-normal temperatures, as well as constraints on pipelines that bring natural gas into the region.

Temperatures in Los Angeles averaged 53 degrees Fahrenheit in February 6°F lower than February 2018 and 7°F lower than the 30-year normal for February. According to the EIA total capacity of pipelines to flow natural gas from out of state into the SoCalGas system was about 2.8 Bcf per day during February 2019 as continued maintenance leaves capacities reduced.