Natural Gas Price Analysis for March 23, 2018

Natural gas prices moved lower following a report from the Department of Energy that showed that inventories declined slightly less than expected. March is still a drawing month, and Thursday’s reduction did not impress market participants.  Colder than normal weather is forecast to cover most of the United States for the next 8-days.

Technicals

Natural gas prices broke through trend line support and are poised to test the February lows at 2.52. Resistance is seen near former support now resistance at 2.66 and then the 10-day moving average at 2.69. Momentum has turned negative as the MACD (moving average convergence divergence) index generated a crossover sell signal. This occurs a 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).

Inventories Dropped Less than Expected

The EIA reported that working gas in storage was 1,446 Bcf as of Friday, March 16, 2018. This represents a net decrease of 86 Bcf from the previous week. Expectations were for stocks to fall by 87 Bcf. Stocks were 667 Bcf less than last year at this time and 329 Bcf below the five-year average of 1,775 Bcf. At 1,446 Bcf, total working gas is within the five-year historical range.

Consumption in end-use demand sectors increases. With colder temperatures in many parts of the Lower 48 states, total U.S. consumption of natural gas rose by 5% compared with the previous report week, according to data from the EIA. Natural gas consumed for power generation climbed by 4% week over week. Industrial sector consumption increased by 2% week over week. In the residential and commercial sectors where natural gas use for space heating is common, consumption increased by 9%. Natural gas exports to Mexico decreased 1%.

NAFTA’s three counties are “finally starting to converge” on the challenging rules around automotive content rules, said U.S. Trade Representative Lighthizer as reported by the Globe and Mail. He noted that Canada and the U.S. have the “similar objective” to repatriate additional auto manufacturing jobs following many years of seeing those jobs shift to Mexico.