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David Becker

Natural gas prices moved lower on Wednesday ahead of Thursday inventory report from the Department of Energy. Expectations are for a 103 Bcf build according to survey provider Estimize. Prices fell by nearly 5%, and broke down through trend line support making a fresh low for the June contract. The weather is expected to be warmer than normal throughout the east coast for the next 6-10 and 8-14 days according to the most recent report from the National Oceanic Atmospheric Administration. This would likely decrease heating demand on the east coast during a shoulder month.

Technical Analysis

Natural gas prices tumbled on Wednesday, slicing through trend line support and making a fresh low for the June contract. Target support is seen near the May contract low of 1.51. Resistance is the former breakout level of 1.80. Additional resistance is seen near the 50-day moving average at 1.87. The 10-day moving average is poised to cross below the 50-day moving average which means that a short term downtrend is now in place.

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Short term momentum is negative as the fast stochastic continues to drop lower, printing a reading of 6, which his well below the oversold trigger level of 80 which could foreshadow a correction. Medium-term momentum is negative as the MACD (moving average convergence divergence) histogram is printing in the red with a downward sloping trajectory which points to lower prices.

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Consumption is Expected to Decline

The US Department of Energy expects total consumption of natural gas to average 81.7 billion cubic feet per day in 2020, down 3.9% from the 2019 average primarily because of lower industrial sector consumption of natural gas. EIA forecasts industrial natural gas consumption to average 21.3 Bcf per day in 2020, down 7.1% from 2019 as a result of lower expected manufacturing activity.

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