David Becker
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Natural gas prices moved lower on Friday forming the next level of a bear flag continuation pattern. The weather does not appear to be an impetus as the forecast is expected to remain near formal for the next 6-10 and 8-14 days according to the National Oceanic Atmospheric Administration. Demand rose but it was offset with increasing supply. LNG exports outside the United States decreased week over week according to the EIA.

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Technical analysis

Natural gas prices moved lower forming the continuation part of the bear flag pattern. This is a pause that refreshes lower. After the initial drop, prices whipsaw and then consolidate before continuing to decline. An increase in volatility is what is expected after the market breaks down. Resistance near the breakdown level near 2.47. Support is seen near last week’s lows near 2.27. Medium-term momentum is negative as the MACD histogram is printing in the red with a downward sloping trajectory which points to lower prices. Short term momentum continues to whipsaw generating a crossover buy signal on Tuesday and is now poised to generate a crossover sell signal. The current reading on the fast stochastic is 15, below the oversold trigger level of 20 which could foreshadow a correction.


Demand Rises and LNG Exports Fall

The EIA reports that demand increased across all sectors. Total US consumption of natural gas rose by 7% compared with the previous report week. Natural gas consumed for power generation climbed by 6% week over week. In the residential and commercial sectors, consumption increased by 13%. Industrial sector consumption stayed constant, averaging 24.4 Bcf per day. Natural gas exports to Mexico increased by 2%. Separately, LNG exports decrease week over week. Ten liquefied natural gas vessels with a combined LNG-carrying capacity of 36 Bcf departed the United States between November 28 and December 4, according to the EIA.

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