Natural Gas Price Prediction – Prices Whipsaw Following Inventory Report

David Becker
Natural gas daily chart, October 10, 2018

Natural gas prices whipsawed tumbling lower as riskier asset came under pressure and then rebounding into the close. Inventories increased in line with expectations, but the colder than normal weather than is expected to cover most of the US for the next 2-weeks should increase heating demand driving up the price of natural gas.  The remanence of Hurricane Michael made its way into the mid-Atlantic and is expected to pick up steam as it re-enters the Atlantic Ocean. There where few production installation that were damaged by the storm. Tropical Storm Nadine is heading west, but it does not look like that storm will make it to the US.

Technical Analysis

Natural gas prices whipsaw slamming down 3% and then finishing the session down 1.5%.  Prices seemed to find support near the 10-day moving average at 3.18.  Resistance is seen near the October highs at 3.38. Short term momentum has turned negative as the fast stochastic generated a crossover sell signal in overbought territory. Momentum as reflected by the MACD is decelerating as the histogram is printing in t eh red with a declining trajectory which points to consolidation.

Inventories Rose In Line with Expectations

The Energy Information Administration reported that working gas in storage was 2,956 Bcf as of Friday, October 5, 2018. This represents a net increase of 90 Bcf from the previous week. Expectations were for inventories to rise by 91 Bcf. Stocks were 627 Bcf less than last year at this time and 607 Bcf below the five-year average of 3,563 Bcf. At 2,956 Bcf, total working gas is below the five-year historical range. This could generate a squeeze in prices if the whether is cold in October and November.  The beginning of the withdrawal season is fast approaching on November 1, 2018.  The trajectory is still well below what it needs to be for prices to remain stable.

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