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EIA Downgrades the Natural Gas Outlook

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Natural gas outlook

On February 12, the EIA (U.S. Energy Information Administration), in its Short-Term Energy Outlook report, downgraded Henry Hub natural gas spot to $2.83 per MMBtu (million British thermal units) in 2019—$0.06 below the previous forecast. The forecast is 10.2% below the average level in 2018. Strong natural gas production in the United States might pressure thet prices. Next, we’ll discuss the key drivers for natural gas production.

Natural gas–weighted stocks like Chesapeake Energy (CHK), Antero Resources (AR), and Cabot Oil & Gas (COG) might be in trouble if natural gas prices fall more or don’t recover from the current levels. In recent months, there have been more “sell” recommendations for Chesapeake Energy.

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Natural gas

On February 12, natural gas March futures rose 1.7% and settled at $2.688 per MMBtu (million British thermal units). However, with the EIA’s report discussed above, a fall might be possible from these levels. If the negative difference between the oil inventory and the five-year average expands, it might bring relief for natural gas bulls. We’ll discuss the EIA’s inventory data in Part 3 of this series. Any possible pullback might not last in the long term until weather data turn in favor of natural gas. On February 12, the weather forecast data suggest higher total degree days than the expectations for the next week.

Important price points on February 13

On February 13 at 5:56 AM EST, the natural gas active futures were 11.9%, 23.6%, 25.1%, and 18% below their 20-day, 50-day, 100-day, and 200-day moving averages, respectively. When natural gas is below these key moving averages, it indicates weakness in the prices. On the downside, the closing level of $2.46 would be important for natural gas prices until February 15.

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