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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.


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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