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David Becker
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Oil refinery

Natural gas prices tumbled on Monday dropping 5.3% but settling off the session lows. Prices dropped following a report from the National Oceanic Atmospheric Administration that shows the weather is forecast to be warmer than normal over the next 8-14 days. Most of the mid-west is covered with frigid temperatures, but expectations are for a warming trend that will likely reduce demand during the next 2-week period.

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Technical Analysis

Natural gas prices tumbled slicing lower and bouncing near support at the 50-day moving average at 2.62. A break of this level would see a test of the October lows at 2.38. Resistance is seen near the 10-2.74. Short term momentum is turning negative as the fast stochastic generated a crossover sell signal. Medium-term momentum has turned negative as the MACD (moving average convergence divergence) index generated a crossover sell signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses below the MACD signal line (the 9-day moving average of the MACD line). The MACD histogram is printing in red with a declining trajectory which points to lower prices.

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Demand Rose as the Weather Turned Cold

Demand surged in residential and commercial sectors. Total US natural gas consumption rose by 8% compared with the previous report week, according to the EIA. In the residential and commercial sectors, consumption increased by 40% as generally cooler temperatures prompted widespread demand for space heating for this first time this season in the Lower 48 states. Natural gas consumed for power generation declined by 4% week over week. Industrial sector consumption decreased by 3% week over week. Natural gas exports to Mexico decreased 1%.

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