Natural gas prices rebounded on Thursday following a larger than expected draw in natural gas inventories. The weather is expected to be much colder than normal through all of the United States for the next two weeks. The ridge/ trough pattern could mean that the cold weather could remain in place for a considerable period. Prices are forming a bull flag pattern which is a pause that refreshes higher.
Technical Analysis
Natural gas prices rebounded 1.3% on Thursday but were unable to make a higher high and did trade at a lower low, which is generally a sign of a downtrend. Prices recapture short term support near a downward sloping trend line that comes in near 2.80. Resistance is seen near the February highs at 3.0. The trend is upward sloping. The 10-day moving average recently crossed above the 50-day moving average, which means that a short-term uptrend is now in place. Momentum is positive as the MACD (moving average convergence divergence) index recently generated a crossover buy signal. The MACD histogram is printing in positive territory with an upward sloping trajectory which points to higher prices.
Inventories Fall More than expected
According to the EIA, natural gas in storage was 2,689 Bcf as of Friday, January 29, 2021. This represents a net decrease of 192 Bcf from the previous week. Expectations were for a 172 Bcf draw in stockpiles according to survey provider Estimize Stocks were 41 Bcf higher than last year at this time and 198 Bcf above the five-year average of 2,491 Bcf. At 2,689 Bcf, total working gas is within the five-year historical range.
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