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David Becker
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Natural gas prices moved lower on Wednesday ahead of Thursday’s inventory report from the Department of Energy. Expectations are for a 99 Bcf build in natural gas stockpiles according to Estimize. Last week the actual release was much larger than expected, but it took until today for prices to reflect the large build. There are three storms that have a small chance of beginning a tropical cyclone that are twirling in the Atlantic. The weather is expected to remain normal for the next 8-14 day, keeping natural gas heating demand subdued.

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Technical Analysis

Natural gas prices tumbled nearly 2.25% on Wednesday ahead of Thursday’s inventory report. Prices broke down and are poised to test target support which is an upward sloping trend line that comes in near 2.21. Resistance is seen near the 10-day moving average near 2.32. Short term momentum has turned negative as the fast stochastic generated a crossover sell signal. The only caveat is that the current reading on the fast stochastic is 6, well below the oversold trigger level of 20 which could foreshadow a correction.

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Net Injections Surged Last Week

The EIA reported that natural gas inventories increased by 112 Bcf for the week ending September 27, compared with the five-year average of injections of 83 Bcf and last year’s net injections of 91 Bcf during the same week. Working gas stocks totaled 3,317 Bcf, which is 18 Bcf lower than the five-year average and 465 Bcf more than last year at this time. The average rate of net injections into storage is 28% higher than the five-year average so far in the refill season. If the rate of injections into storage matched the five-year average for the remainder of the refill season, total inventories would be 3,674 Bcf on October 31, the beginning of the withdrawal season.

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