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David Becker
Natural gas daily chart, September 21, 2018

Natural gas prices moved sideways after breaking out on Thursday as inventories remained in line with expectations but a cold weather forecast boosted future expected demand. Demand has already been climbing according to the EIA, as power consumption moved higher in the latest week. With NOAA forecasting colder than normal weather over the next week, heating demand will begin to tick up just when inventories are well below the 5-year average range. With the 5-year average prices at 3.12, prices are below their historical value.  Those who are short are betting that high level of production will offset rising demand.

Technical Analysis

Natural gas prices moved sideways forming an inside day where the high is less than the prior days high and the low is higher than the prior days low which is a sign of indecision. Prices broke out on Thursday above trend line resistance and hovered above that level near 2.96 which is short-term support. The 10-day moving average crossover above the 50-day moving average which signals that a short-term up trend is in place. Momentum has turned positive as the MACD (moving average convergence divergence) index generated a crossover buy signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses above the MACD signal line (the 9-day moving average of the MACD line).

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Demand Rises Ahead of the Withdrawal Season

Demand rises, driven by consumption in the electric power sector. Total U.S. consumption of natural gas rose by 5% compared with the previous report week, according to the EIA. Natural gas consumed for power generation climbed by 14% week over week. Industrial sector consumption decreased by 2% week over week. In the residential and commercial sectors, consumption declined by 12%. Natural gas exports to Mexico were the same as last week, averaging 4.7 Bcf per day. The withdrawal season begins October 31, and a cold snap could actually generate a draw ahead of schedule.

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