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David Becker
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Natural gas prices were slightly higher on Friday ahead of a long U.S. holiday weekend. According to the National Oceanic Atmospheric Administration, Hurricane Elsa has formed in the Atlantic and it is heading for the Gulf of Mexico. The current trajectory for the storm is to move into the easter Gulf of Mexico and move over Florida. Any trajectory westward would push the storm into the Natural Gas Producing regions near New Orleans.  This would generate upward volatility to prices. The weather is expected to remain warmer than normal in the West and North East for the next 2-weeks, according to NOAA. U.S. consumption of natural gas increases driven by demand for power generation.

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Technical Analysis

Natural gas prices continued to consolidate after a robust week where they increased nearly 6%. Prices made a lower high and a higher low which is a sign of indecision.  Support is seen near the 10-day moving average near 3.50. Resistance is seen near June highs at 3.82. Short-term momentum is turning negative which is surprising as the fast stochastic generated a crossover sell signal. 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).

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Consumption Rose Because of Warm Weather

U.S. consumption of natural gas increases driven by demand for power generation. Total U.S. consumption of natural gas rose by 6.0% compared with the previous report week, according to data from the EIA. Natural gas consumed for power generation climbed by 10.5% week over week as much of the United States experienced temperatures much higher than normal, especially in the Pacific Northwest. Industrial sector consumption decreased slightly by 0.4% week over week.

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