Natural Gas Prices Surge 14% Ahead of Inventory Report

On Wednesday, natural gas surged higher, rising another 14%, notching up a 24% gain for the week after climbing 5% last week. According to a recent National Oceanic Atmospheric Administration report, Cool-weather is expected to cover most of the Mid-West and North East for the next 8-14 days. The surge in prices comes ahead of Thursday’s inventory report from the Department of Energy. Expectations are for stockpiles to decline by 133 BCF, according to survey provider Estimize. This draw follows last week’s smaller than expected draw of 33 BCF. The dollar also tumbled on Wednesday. Since natural gas is priced in dollars, a weaker dollar generally leads to higher commodity prices.

Technical Analysis

On Wednesday, natural gas prices rallied, rising a robust 13%. Prices sliced through resistance support near the 50-day moving average at  4.40. Resistance is seen near the November highs at 5.02. Short-term momentum is positive as the fast stochastic generated a crossover buy signal. Prices are now overbought as the fast stochastic is printing a reading of 97, well above the overbought trigger level of 80, which foreshadows a correction. Medium-term momentum is positive as the MACD (moving average convergence divergence) histogram is printing in positive territory with an upward sloping trajectory which points to higher prices.