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David Becker
group of industrial workers in a refinery – oil processing equipment and machinery

Natural gas prices moved lower on Wednesday ahead of Thursday inventory report from the Department of Energy. Expectations are for inventories to rise by 132 Bcf according to survey provider Estimize. This follows a 98 Bcf increase reported by the Energy Information Administration. There is one disturbance in the Gulf of Mexico that has a 50% change of forming a tropical cyclone. Two storms in the Atlantic have fizzled. The weather is expected to be cooler than normal over the next 8-14 days according to the National Oceanic Atmospheric Administration.

Technical Analysis

Natural gas prices reversed Tuesday rally and closed on the lows of the session near support seen near the 10-day moving average at 2.28. Short term momentum has flipped and turned positive in oversold territory as the fast stochastic generated a crossover buy signal. Additionally, the current reading on the fast stochastic is 39, which is in the middle of the neutral range. Medium-term momentum as turning and the MACD (moving average convergence divergence) is poised to generate 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 is Declining

The EIA is reported that demand is down driven by the power generation sector. Total US consumption of natural gas fell by 3% compared with the previous report week, according to the EIA. Natural gas consumed for power generation declined by 6% week over a week because of overall lower cooling demand. Industrial sector consumption decreased by 1% week over week. In the residential and commercial sectors, consumption declined by 1%. Natural gas exports to Mexico were the same as last week, averaging 5.4 Bcf per day.

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