Inventory, OPEC+: Will Natural Gas Prices Fall?

Today at 11:42 AM ET, natural gas prices rose 1.9% despite a bearish inventory report. The United States Natural Gas Fund LP (UNG) also rose with natural gas. The EIA (US Energy Information Administration) reported a fall of 19 Bcf (billion cubic feet) in natural gas inventories for the last week. The Reuters poll suggested a fall of 22 Bcf. Usually, a fall less than what the market expected could drag natural gas prices down.

Also, the negative difference between natural gas inventories and their five-year average contracted to 0.3%. In the past, a contraction in the negative inventories was followed by weakness in natural gas prices. To learn more, please read Inventories Spread: Will a Flip Save Natural Gas Bulls?

Weather forecast

Today the Refinitiv GFS00 weather model’s HDD (heating degree days) reading increased by nine units over yesterday’s reading. The EC00 model indicates a small decline of 0.8 HDD from Wednesday’s reading. The time horizon for this weather prediction is until December 20. A possible rise in HDDs suggests cooler weather in the Lower 48 states.

The Refinitiv report further highlighted that dry natural gas production has fallen, while LNG (liquefied natural gas) exports have risen. A possible rise in HDDs plus a fall in production could reduce natural gas inventories, which could support the rise in natural gas.

Last week, natural gas prices fell because of a decrease in HDDs. To learn more, please read Natural Gas Prices: What Indicators Suggest This Week.

How could OPEC+ impact natural gas?

Media reports suggest that OPEC+ members could go for a deeper cut. A fall in the global oil supply might push oil prices upward. If US shale oil producers start to increase their output concurrently, natural gas supplies could rise and would adversely impact natural gas prices. Natural gas is an outcome of oil extraction. Please read Crude Oil Prices: After Inventory, Watch OPEC+ to learn more.

Since the US shale oil revolution in 2007, gas supplies have risen significantly. Natural gas marketed production rose by 83.5% between January 2007 and September 2019. Last week, the natural gas rig count was 131, compared to 1,411 in early 2007.

Since 2007, the natural gas rig count has fallen considerably. However, the oil rig count rose by 139%. To learn more, please read Oil Rigs Impact Natural Gas Production.

Moving averages

On Monday, natural gas prices moved above the 100-DMA (day moving average). Last week, natural gas futures struggled to break above this moving average. Today, the 50-DMA level of $2.47 is the next important resistance zone for active natural gas futures. Natural gas futures were 5.4% and 2.1% below their 20- and 200-DMA levels, respectively.

To discover more about energy commodities, please read Oil Prices: A Look at China and OPEC’s Impact.