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David Becker

Natural gas prices tumbled in early trade and then rebounded into the close ahead of Thursday’s inventory report from the Energy Information Administration. Expectations are for a 86 Bcf build in natural gas stockpiles, down from last weeks 102 Bcf build. The weather is expected to remain normal over the next 2-weeks keep demand in line. With many states opening their economies, electricity demand is expected to edge higher. The Fed kept rates unchanged but had a downbeat view of future short-term economic activity. This could put additional pressure on natural gas prices.

Technical Analysis

Natural gas prices rebounded sharply after hitting a low of 1.77 in early trade. Prices settled the session up 0.38%. Support is seen near the June lows at 1.77. Resistance is seen near the 10-day moving average at 1.90. Short-term momentum has turned positive after turning negative on Tuesday. The current reading on the fast stochastic is 34, jumping above the oversold trigger level and pointing to accelerating positive momentum. Medium-term momentum is flat with the MACD (moving average convergence divergence) histogram printing near the zero index level with a flat trajectory that points to consolidation.

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Demand Edges Higher

Overall demand rises because of electric power sector demand. Total U.S. consumption of natural gas rose by 3.9% compared with the previous report week, according to the EIA. Natural gas consumed for power generation climbed by 10.1% week over week. In the residential and commercial sectors, consumption declined by 5.9%. Industrial sector consumption decreased by 0.3% week over week.

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