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David Becker

Natural gas prices moved higher but were unable to pierce through resistance levels. Demand increased in the latest week due to an uptick in power generation. The weather is expected to be warmer than normal over the next 2-weeks, which should further buoy power generation. There no tropical cyclone activity in the lower Atlantic or the Gulf of Mexico, while a Tropical storm Christina continues to move away from land in the Pacific which will not impact any energy installation.

Technical Analysis

Natural gas prices surged higher rising 2.4% but settled well off its highs. Prices tested and hit resistance near the 50-day moving average at 1.924. Support is seen near the 10-day moving average at 1.71. Medium-term momentum remains positive as the MACD (moving average convergence divergence) histogram prints in the black with an upward sloping trajectory which points to higher prices. Short term momentum is positive to neutral as the fast stochastic prints a reading of 89, well above the overbought trigger level of 80, which could foreshadow a correction.

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Demand Increases Due to Power Generation

Total U.S. consumption of natural gas rose by 9.8% compared with the previous report week, according to data from the EIA. Natural gas consumed for power generation climbed by 20.5% week over week as temperatures increase following last week’s mild weather. In the residential and commercial sectors, consumption declined by 0.1%. Industrial sector consumption decreased by 1.0% week over week. Natural gas exports to Mexico increased 6.4%.

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