Natural Gas Price Prediction – Prices Tumble and Form Outside Reversal Day

Natural gas prices tumbled lower into the close on Wednesday ahead of Thursday’s inventory report from the Department of Energy. Prices generated an outside reversal day which was a higher high a lower low and a lower close during an upward trend.  The move comes despite the resurgence of Tropical Storm Kurt which is now headed toward the Caribbean see. The storm is expected to become a tropical depression but the trajectory shows it could be headed toward the Gulf of Mexico. The forecast over the next 2-weeks is expected to be colder than normal in the mid-west which could boost demand ahead of the withdrawal season. Natural gas inventories are expected to increase by 70 Bcf according to Estimize.  Inventories remain below the 5-year average range which continue to put upward pressure on prices.

Technical Analysis

Natural gas tumbled 3.15% after hitting a fresh high, as traders took profits ahead of Thursday’s inventory report. Prices generated an outside reversal day which is a bearish sign. Support is seen near former resistance at 2.97. Additional support is seen near the 10-day moving average at 2.93. Momentum is turning neutral as the MACD (moving average convergence divergence) histogram prints in the black with a declining trajectory which points to consolidation.

The Fed Increased Interest Rates Capping Commodity Prices

The Fed increased interest rates by 25-basis points increasing the value of the dollar and generating headwinds for commodities like natural gas that are priced in dollars.  The Fed’s interest rate forecasts showed shows the fed sees rates above the target of 3% for an extended period.  Monetary policy is expected to remain above 3% until 2021. This is the first meeting where the Fed made projections out to 2021. The Fed also sees another rate hike coming in 2018. At this meeting, 75% of the Fed officials see a 4-rate hike in 2018.