7 Nov

Are Natural Gas Prices Ignoring EIA Data?

WRITTEN BY Rabindra Samanta

In today’s trading session, natural gas prices have fallen 1%. At 10:30 AM ET, the EIA reported its natural gas inventories. And, based on the report, natural gas inventories rose by 34 Bcf (billion cubic feet) for the week ended November 1. That increase came in 11 Bcf below a Reuters poll’s suggested rise.

Moreover, the difference between natural gas inventories and their five-year average was at 0.8% for the week. On a week-over-week basis, this difference contracted by 65 basis points. The inventories spread—this difference—is important for natural gas prices. A rise in the inventories spread could drag natural gas prices down. And the opposite is also true. To learn more, see EIA Natural Gas Inventory Data Is Affecting the Energy Sector.

So are natural gas prices on track, or do they seem to be ignoring the data? Let’s take a closer look.

Next week

For the week ended November 9, natural gas inventories are expected to decline by 3 Bcf. This outlook is based on Reuters’ forecast. With this decline, the inventories would fall into the negative territory. If the EIA reports a decline in natural gas inventories on November 14, natural gas futures could rise next week. 

Weather forecast and natural gas

On November 7, Reuters’ weather forecast model suggests a fall between 7.4 and 12.2 HDD (heating degree days) from the earlier forecast. This difference might be behind the fall in natural gas futures despite bullish inventory data. “Total flows of feedgas for LNG liquefaction” are at 6.9 Bcf per day. A day ago, they stood at 6.8 Bcf per day.

Moving averages suggest bullish sentiment

On November 6, natural gas active futures were 19.5%, 12.1%, 14.3% and 14.6% above their 20-, 50-, 100- and 200- DMAs (day moving averages), respectively. Prices more than these DMAs suggest bullish sentiment for natural gas. However, after the inventory report, the difference between natural gas prices and their 200-DMA narrowed. The 200-DMA at the $2.50 level is an important support zone for natural gas active futures going forward.

The difference between the 50- and 200-DMA has contracted to 2.2%. Technically, if the 50-DMA moves above the 200-DMA, we might see further upside in natural gas futures. This month so far, active natural gas futures gained 7.4% as of November 6. The United States Natural Gas Fund LP (UNG) also rose by the same magnitude. UNG tracks natural gas futures.

On the upside, the psychologically important level of $3 could be an important resistance. Since January 25, natural gas prices failed to close above this level. Plus, traders should be careful about the upside in natural gas prices. The EIA has forecast a warmer winter for 2019–2020.

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