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David Becker

Natural gas prices were walloped on Friday, declining 7.5% and a contract low for the January 2020 futures contract. Prices tumbled as warmer than expected weather is forecast to move its way up from the Gulf and keep the weather warmer than normal for the next 6-10 and 8-14 days. Hedge funds likely continued to add to short positions, but there was little resistance this week as prices fell by 13%.

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Technical analysis

Natural gas prices tumbled on Friday, declining by more than 7.5%, and closing down 13.2% for the week. Prices were under pressure as trader’s see little impetus to drive up demand. Hedge funds remain short and continue to pressure prices. Support is easier to see on a weekly chart as prices appear to have touched trend line support near 2.27. Resistance on natural gas prices is seen near former support at 2.48. Medium term momentum is negative as the MACD histogram is printing in the red with a downward sloping trajectory which points to lower prices. Prices are oversold on both a dialing and weekly basis. The weekly fast stochastic is printing a reading of 20, which is just at the oversold trigger level and could foreshadow a correction.


Demand Moves Lower

Demand moved lower across all sectors, according to the Energy Information Administration led by declines in power burn. Total US  consumption of natural gas fell by 5% compared with the previous report week, according to the EIA. Natural gas consumed for power generation declined by 7% week over week. Industrial sector consumption decreased by 1% week over week. In the residential and commercial sectors, consumption declined by 5%. Natural gas exports to Mexico were the same as last week, averaging 5.3 Bcf per day.

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