Natural Gas Price Prediction – Prices Drop but Hold Support Ahead of Inventory Report

Natural gas prices moved lower on Wednesday ahead of Thursday inventory report from the Department of Energy.  Expectations are for a 117 Bcf draw according to the average estimate from Estimize. The range is between 98 BCF and 170 BCF.  Demand for the latest week declined as the weather was warmer in the high population centers and LNG exports declined according to the Energy Information Administration. Colder than normal weather is forecast to cover most of the west coast and mid-west over the next 6-10 days. The cold weather shifts west for the 8-14 day forecast which is likely the reason for the decline in prices.

Technical Analysis

Natural gas dropped on Wednesday and held support near an upward sloping trend line that comes in near 2.55. A break below this level and then the 2.50 level could lead to a drop to the 2016 lows at 1.55. Resistance is seen near the 10-day moving average at 2.65. Short term momentum has turned negative as the fast stochastic generated a crossover sell signal. The fast stochastic is printing a reading of 6, well below the oversold trigger level of 20 which could foreshadow a correction. The MACD (moving average convergence divergence) index generated a crossover buy signal. While this points to accelerating positive momentum, the trajectory of the MACD is flat which points to consolidation.

Demand Declined on Warmer than Normal Weather

Demand decline because of warmer than normal weather according to the EIA. Total U.S. consumption of natural gas fell by 15% compared with the previous report week. In the residential and commercial sectors, consumption declined by 21% as space heating demand receded. Natural gas consumed for power generation declined by 11% week over week. Industrial sector consumption decreased by 7% week over week.  by

U.S. LNG exports decrease week over week. Foggy conditions caused a decline in exports from the Sabine Pass terminal, prompting the closure of the Sabine Pass waterway for large ships, including LNG ships, since February 2. The waterway will reopen when heavy fog subsides, according to the EIA.