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David Becker
Oil refinery

Natural gas prices moved higher on Wednesday rising another 3.6%, ahead of Thursday’s inventory report. Expectations are for an 84 Bcf build in stockpiles according to Estimize following last week’s 87 Bcf increase in inventories.  The weather is expected to be colder than normal for the next 6-10 and 8-14 day forecast according to a report from the National Oceanic Atmospheric Administration. The cold weather will likely increase heating demand during the beginning of the withdrawal season. The weather pattern is forming a ridge-through pattern which generally brings cold weather from Canada down into the mid-west of the United States. Hedge funds are still short futures and options position which could continue to drive short covering.

Technical Analysis

Natural gas prices continued to rally on Wednesday ahead of Thursday inventory report. Prices tested the September highs which is seen as short-term resistance at 2.71. A break of that level could lead to a test of the March highs at 2.90. 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). The MACD histogram is printing in the black with an upward sloping trajectory which points to higher prices.


Demand Rises in the Latest Week

Demand is on the rise according to a report from the EIA. Total US consumption of natural gas rose by 2% compared with the previous report week, according to data from the Energy Information Administration. Natural gas consumed for power generation climbed by 2% week over week. Industrial sector consumption decreased by 1% week over week. In the residential and commercial sectors, consumption increased by 6%. Natural gas exports to Mexico decreased by 2%.

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