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David Becker
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Natural gas whipsawed, moving higher and reversing mid-day to close on the lows of the session. This movement comes ahead of Thursday’s inventory report from the Department of Energy. Expectations are for a 175 Bcf draw according to survey provider Estimize. The weather is expected to remain mild across the mid-west and the east coast, which has put downward pressure on prices, but cold weather in the west could continue to move east, helping buoy prices. Demand declined in the latest week according to the EIA.

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Technical Analysis

Natural gas moved higher initially but reversed course mid-day and close on the lows of the session. Resistance is seen near the 10-day moving average at 2.85. Support is seen near the 50-day moving average at 2.72. Short-term momentum has reversed and turned negative as the fast stochastic generates a crossover sell signal. Medium-term momentum is negative as the MACD (moving average convergence divergence) index recently generated a crossover sell signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average crosses below the MACD signal line (the 9-day moving average of the MACD line. The MACD histogram is printing in negative territory with a downward sloping trajectory which points to lower prices.

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Demand Decreases

Demand declines in response to lower heating and power demand. According to the EIA, total U.S. consumption of natural gas fell by 20.8% compared with the previous report week. Consumption in the residential and commercial sectors declined by an estimated 28.1%, or 17.65 Bcf per day, the highest weekly decline on record. Natural gas consumed for power generation declined by 16.1% week over week.

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