Natural Gas Prices Break Out Despite Unexpected Stockpile Build

Key Insights

• Natural Gas prices rallied sharply
• Prices closed near a four-month high
• The weather is expected to be normal

On Thursday, natural gas prices broke despite an unexpected build in natural gas inventories. The weather is expected to be normal during the next 6-10 and 8-14 days, with warm on bost Coasts. The weather situation should ease heating demand.

According to the EIA, natural gas in storage was 1,415 Bcf as of Friday, March 25, 2022. This represents a net increase of 26 Bcf from the previous week. Expectations were for a 26 Bcf draw. Stocks were 347 Bcf less than last year and 244 Bcf below the five-year average of 1,659 Bcf. At 1,415 Bcf, total working gas is within the five-year historical range.

Technical Analysis

On Thursday, natural gas prices closed broke out above trend line resistance. Target resistance is seen near the October highs at 6.46.

Short-term momentum has turned positive as the fast stochastic generated a crossover buy signal. Prices have moved back into over-bought territory with the Fast Stochastic printing a reading of 93, above the overbought trigger level of 80.

Medium-term momentum has turned positive. The MACD (moving average convergence divergence) index makes a crossover buy signal. This scenario occurs when the MACD line (the 12-day moving average minus the 26-day moving average, crosses above the 9-day moving average of the MACD line.