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David Becker
Gas industry

Natural gas prices formed an outside day initially making a higher high and then falling into the close and hitting a lower low declining 1.9% for the day. The weather is expected to be much colder than normal especially in the mid-west for the next 6-10 and 8-14 days driving up heating demand. There is one tropical disturbance in the lower Atlantic that NOAA projects 10% chance of turning into a tropical cyclone over the next 48-hours. Hedge funds are still short futures and options position which could continue to drive short covering.

 

Technical Analysis

Natural gas prices ran into resistance near the May and September highs at 2.71. A break of that level could lead to a test of the March highs at 2.90. Support on natural gas prices is seen near the 10-day moving average at 2.41. Short term momentum has turned negative as the fast stochastic generated a crossover sell signal in overbought territory. The current reading on the fast stochastic is 80, at the oversold trigger level which could foreshadow a correction. Medium-term 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). The MACD histogram is printing in the black with an upward sloping trajectory which points to higher prices.

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Inventories Rose More than Expected

The EIA reported on Thursday that natural gas in storage was 3,695 Bcf as of Friday, October 25, 2019. This represents a net increase of 89 Bcf from the previous week. Expectations were for a 85 Bcf increase according to survey provider Estimize. Stocks were 559 Bcf higher than last year at this time and 52 Bcf above the five-year average of 3,643 Bcf. At 3,695 Bcf, total working gas is within the five-year historical range.

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