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David Becker

Natural gas prices broke down as the US started to discuss shutting down areas of Texas, Florida and Arizona. A potential close down in those states is the lack of electricity demand due to a slower start, is weighing on natural gas prices. On Thursday the Energy Information Administration reported will report natural gas inventory levels. Expectations are for a 97 Bcf build in stockpiles according to survey provider Estimize.

Technical Analysis

Natural gas prices dropped 1.8% on Wednesday and are poised to test target support is the continuation contract low at 1.52. Resistance is seen near the 10-day moving average at 1.76. Short-term momentum has turned negative as the fast stochastic generated a crossover sell signal. The current reading on the fast stochastic is 6, well below the oversold trigger level of 20 which could foreshadow a correction. Medium-term momentum remains negative as the MACD (moving average convergence divergence) histogram prints in the red with a downward sloping trajectory which points to lower prices.

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Supply Increases

Supply rose slightly, with gains in dry natural gas production. According to the EIA the average total supply of natural gas rose by 0.2% compared with the previous report week as activity in the Gulf of Mexico resumes following Tropical Storm Cristobal, which caused production shut-ins through late last week. Dry natural gas production grew by 0.5% compared with the previous report week. The average net imports from Canada decreased by 5.5% from last week.

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