Natural Gas Prices Drop Sharply Ahead of Inventory Report

Natural gas prices continued to slide on Wednesday, testing critical support. The move comes ahead of the Thursday inventory report from the Department of Energy. Expectations are for a 211 Bcf draw according to Natural Gas Intelligence. The 5-year average natural gas withdrawal during this survey week is 150 Bcf, and last year’s withdrawal is 175 Bcf. The weather is colder than normal in the South and East Coast during the next 6-10 days. According to the National Oceanic Atmospheric Administration, the weather is warmer than normal throughout the mid-West and West over the next 8-14 days.

 Technical Analysis

Natural gas prices tumbled 5.75%. Support is seen near an upward sloping trend line that comes in near 4 . Resistance is seen near 4.0. Resistance is seen near the 50-day moving average at 4.09. Short-term momentum has turned negative as the fast stochastic generated a crossover sell signal. Prices are oversold. The fast stochastic is printing a reading of 9, below the oversold trigger level of 20 which could foreshadow a correction. Medium-term momentum has turned negative as the MACD (moving average convergence divergence) index generated a crossover sell signal. This scenario occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses below the MACD signal line.

Stocks Dip Through the Average

Natural gas stocks were 393 Bcf less than last year at this time and 143 Bcf below the five-year average of 2,466 Bcf. At 2,323 Bcf, the total working gas is within the five-year historical range.