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Natural Gas Price Prediction – Prices Tumble Following Inventory Report

By:
David Becker
Published: Jun 6, 2019, 20:30 UTC

Inventories rose more than expected

Natural gas daily chart, June 06, 2019

Natural gas prices dropped another 2% on Thursday breaking down in the wake of the Energy Departments report on current natural gas stockpiles. Natural gas inventories came in higher than expected and continue to rise at a robust trajectory. Stronger production and stable demand have allowed inventories to move back toward the middle of the average range for this time of year.

Technical Analysis

Natural gas prices continued to trend lower, moving down to a fresh 3-year low. Support is now seen near the 2016 lows at 1.61. Resistance on natural gas is seen near the 10-day moving average at 2.49.  Momentum has turned negative as the MACD (moving average convergence divergence) index recently generated a crossover sell signal. This occurs 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 printing in the red with a downward sloping trajectory which points to lower prices. Short term momentum is negative as the fast stochastic generated a crossover sell signal in oversold terriory. The current reading on the fast stochastic is 6, below the oversold trigger level of 20, which could foreshadow a correction.

The EIA reported that working gas in storage was 1,986 Bcf as of Friday, May 31, 2019, according to EIA estimates. This represents a net increase of 119 Bcf from the previous week. Expectations were for a 114 Bcf build. Stocks were 182 Bcf higher than last year at this time and 240 Bcf below the five-year average of 2,226 Bcf. At 1,986 Bcf, the total working gas is within the five-year historical range. The trajectory points to inventories hitting the average of the 5-year range in the next few weeks.

About the Author

David Becker focuses his attention on various consulting and portfolio management activities at Fortuity LLC, where he currently provides oversight for a multimillion-dollar portfolio consisting of commodities, debt, equities, real estate, and more.

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