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David Becker
Natural Gas
Natural Gas

Natural gas prices surged higher on Tuesday as colder than normal weather is expected to cover most of the mid-west bringing temperatures in the high 40’s to the upper mid-west which should significantly increase natural gas demand over the next 2-weeks. With inventories below the 5-year average range, prices could spike if the winter is colder than normal. Prices are currently below the 5-year average prices, which has put a floor under prices.

Technical Analysis

Natural gas prices broke out on Tuesday and are poised to hit target resistance near the 2018 highs at 3.60.  Support is seen near former resistance near the June highs at 3.05. Additional support is seen near the 1-day moving average at 3.03. Momentum is 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 moved higher in tandem with price action which reflects accelerating positive momentum. The current reading of 68 remains below the overbought trigger level of 70 which could foreshadow a correction.

Demand declined in the previous week as most was still from electricity.  Withy the cold weather coming it will likely switch to heating demand. The EIA reported that total U.S. consumption of natural gas fell by 2% compared with the previous report week. Natural gas consumed for power generation declined by 10% week over week with cooler weather moving in this week. Industrial sector consumption increased by 2% week over week, while combined residential and commercial sector consumption increased by 22%. Natural gas exports to Mexico decreased 2%.

Overall supply is flat. According to the EIA, the average total supply of natural gas remained the same as in the previous report week, averaging 89.2 Bcf per day. Dry natural gas production grew by 1% compared with the previous report week, averaging 84.4 Bcf per day. Average net imports from Canada decreased by 2% from last week.

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