Natural Gas Price Prediction – Prices Tumble Ahead of EIA Report

Natural gas prices tumbled on Wednesday breaking down below support levels. Prices are facing headwinds as cooling demand has been lighter than expected do to milder than normal weather that has covered most of the mid-west and east coast. On Thursday the Department of Energy will report natural gas inventories, which are expected to increase by 104 Bcf according to Estimize.

Technical Analysis

Natural gas prices tumbled on Wednesday dropping 2.2%, and slicing through support levels near the prior June lows which is now seen as short term resistance near 2.30. Additional resistance is seen near the 10-day moving average at 2.35. Support is seen near the 2016 lows at 1.91. Medium term momentum has reversed as the MACD (moving average convergence divergence) index generated a crossover sell signal. This occur 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 now printing in the red with a declining trajectory which points to lower prices. Short term momentum has turned negative. The fast stochastic generated a crossover sell signal. The current reading on the fast stochastic is 2.6, well below the oversold trigger level of 20 which could foreshadow a correction.

Net Injections Point to Lower Start to the Withdrawal Season

The EIA reports that the average rate of net injections into storage is 40% higher than the five-year average so far in the refill season, which is April through October. If the rate of injections into storage matched the five-year average of 9.4 Bcf per day for the remainder of the refill season, total inventories would be 3,462 Bcf on October 31, which is 230 Bcf lower than the five-year average of 3,692 Bcf for that time of year.