Natural Gas Price Prediction – Prices Move Higher as Inventories Remain Low

Natural gas prices moved higher on Friday, following Thursday’s in line inventory report.  The trajectory of injections continues to flatten ahead of the withdrawal season, which signals that prices should move higher.  The weather in the US is expected to move toward warmer than normal without any areas that are normal or below normal over the next 8-14 day period.

Technical Analysis

Natural gas prices moved higher climbing slightly more than 1.25%, but was unable to recapture resistance near an downward sloping trend line that comes in near 2.97. Support is seen near the 20-day moving average at 2.93. Additional support is seen near the 50-day moving average at 2.87. Momentum is neutral as the MACD (moving average convergence divergence) histogram is printing in the black with a flattening trajectory which points to consolidation.

Inventories Grew In Line with Expectation

The EIA reported that natural gas in storage was 2,387 Bcf as of Friday, August 10, 2018. This represents a net increase of 33 Bcf from the previous week. Stocks were 687 Bcf less than last year at this time and 595 Bcf below the five-year average of 2,982 Bcf. At 2,387 Bcf, total working gas is below the five-year historical range.

Lower Coal Inventories Will Boost Natural Gas Demand

The EIA reports that in May 2018, coal inventories, or stockpiles, in the electric power sector totaled 128 million short tons, 21% lower than in May 2017, and the lowest at that time of year since 2014. Stockpiles have averaged 22% lower during the first five months of 2018 compared with 2017.

A Disturbance is in the Lower Atlantic

The National Hurricane Center is issuing advisories on Tropical Storm Ernesto, located several hundred miles north-northwest of the Azores.  A tropical wave located a few hundred miles east of the Windward Islands is producing disorganized showers and thunderstorms. Environmental conditions are becoming less conducive, meaning its unlikely to become a hurricane.  Development of this system is not expected while it moves westward at about 15 mph.