Natural Gas Price Analysis for January 29, 2018

Natural gas prices pushed higher on Friday, ahead of the weekend following a report from the National Oceanic Atmospheric Administration that showed that the weather is expected to be colder than normal over most of the United States. It appears that cold weather that slipped down from Canada all the way through Texas is now spreading east, and will likely increase heating demand. The ridge / trough pattern, is likely to stay in place for a while increasing natural gas demand in the heart of the United States.  On Thursday the EIA reported that inventories of natural gas dropped by a robust 288 Bcf, which puts inventories below the 5-year low for this time of year.

Technicals

Prices mid-week broke out and then continued to consolidate.  Prices are forming a bull flag pattern just above former resistance now support which is a downward sloping trend line that comes in near 3.28.  Additional support is seen near the 10-day moving average at 3.314. Momentum remains positive as the MACD (moving average convergence divergence) histogram prints in the black with an upward sloping trajectory which points to higher prices. The RSI (relative strength index) moved higher with price action reflecting accelerating positive momentum. The current reading of 70.8, is above the oversold trigger level of 70 which could foreshadow a correction.

Demand Was Lower Last Week

The strong dollar is also helping natural gas prices as Liquified Natural Gas demand continues to increase. The weather last week was warmer than normal which reduced natural gas prices. Total U.S. consumption of natural gas fell by 19% compared with the previous report week, according to data from the Department of Energy, with national temperatures increasing from last week through this week. Natural gas consumed for power generation declined by 18% week over week. Temperatures in the southeastern United States where heating by electricity is common were higher than the freezing temperatures that occurred during the last report week. Industrial sector consumption decreased by 6% week over week. In the residential and commercial sectors, consumption declined by 25%. Natural gas exports to Mexico increased 1%.