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David Becker
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Natural gas prices continued to rally on Wednesday as Tropical Storm Nicholas hit Texas. A second storm is entering the Caribbean that has 30% chance of forming a tropical cyclone in the next 48-hours. There is a third storm in the Atlantic that has recently come off the coast of Africa, which has a 70% chance of becoming a tropical cyclone. According to a report from the National Oceanic Atmospheric Administration, the weather is expected to remain much warmer than normal for the next two weeks.

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Technical Analysis

Natural gas prices rallied further on Tuesday early following Monday’s 5.7% rally.  Support is seen near the 10-day moving average at 4.83. Resistance is seen near the 2014 highs at 6.5. Prices are overbought as the fast stochastic prints a reading of 98 and the RSI prints a reading of 83, both above their respective overbought trigger levels. Medium-term momentum is positive as the MACD histogram prints in positive territory with an upward sloping trajectory which points to higher prices.

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Demand Declines

U.S. natural gas demand falls week over week on reduced demand for power generation. According to the EIA, total U.S. consumption of natural gas fell by 9.4% compared with the previous report week. The decline in natural gas consumed for power generation, which fell by more than 6.0 Bcf per day week over week, accounted for almost all of the total decrease in domestic consumption.

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