Natural Gas Price Prediction – Prices Tumble From Overbought Condition

Natural gas prices tumbled back to earn after rocketing higher on Wednesday. Prices closed near their lows dropping more than 18% and closing on the lows of the session. This comes following an inventory report from the Department of Energy which was in line with expectations. Rumors that hedge funds unwound a position that was long oil and short natural gas buoyed natural gas prices on short-covering but this now seems to be over.  Despite the drop off, natural gas inventories are below the low end of the 5-year range, as working gas underground ended the refill season at the lowest levels since October of 2005.

Technical Analysis

Natural gas prices tumbled dropping 18%, making a lower high and a lower low and ending on the lows of the session. Support is seen near the 20-day moving average at 3.79. Resistance is seen near Wednesday high at $4.92. The sharp movement of price action tool the relative strength index from oversold territory near 86, down to the middle of the neutral range near 58. Positive momentum has decelerated as the MACD (moving average convergence divergence) histogram prints in the black with a flattening trajectory which reflects consolidation.

Inventories Rose in Line with Expectations

Working gas in storage was 3,247 Bcf as of Friday, November 9, 2018, according to EIA estimates. This represents a net increase of 39 Bcf from the previous week, which was in line with expectations. Stocks were 528 Bcf less than last year at this time and 601 Bcf below the five-year average of 3,848 Bcf. At 3,247 Bcf, total working gas is below the five-year historical range.

Working natural gas in underground storage in the Lower 48 states as of October 31, 2018, totaled 3,208 billion cubic feet. Inventory levels for the Lower 48 states and in each of the U.S. natural gas regions ended the refill season at their lowest levels since October 2005, and these levels were considerably lower than their previous five-year averages. Although the natural gas storage injection, or refill, season is traditionally defined as April 1 through October 31, additional injections may occur into November.