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David Becker
Natural Gas

Natural gas prices broke down on Monday, as there is little impetus to buoy prices. There are currently no tropical storms that are expected to form in the Atlantic over the next 48-hours according to the National Oceanic Atmospheric Administration (NOAA). In addition, NOAA is forecasting that the weather is expected to turn cooler during the next 8-14 days, likely reducing the need for cooling demand. With production rising, and demand potentially declining, prices are under pressure. Volatility is also nears its annual low. Natural gas implied volatility has eased to 34%, which is much lower than the average as well as the peak during this period when it can reach 100%. Consumption of natural gas recently hit a record, but production continues to keep up with rising demand.

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Technical Analysis

Natural gas prices broke through support on Monday, slicing through the 2019 lows at 2.16 which is now seen as short term resistance. Target support is now seen near the 2016 lows at 1.90 and then 1.62. 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 the red with a downward sloping trajectory which points to lower prices for natural gas. Prices are oversold. The fast stochastic is printing a reading of 5, well below the oversold trigger level of 20 which could foreshadow a correction.


US Natural Gas Consumption is Rising

The US set a new record for natural gas consumption by electric power plants of 44.5 billion cubic feet per day on Friday, July 19, according to the EIA. Since July 1, 2019, US power consumption has exceeded the previous record of 43.1 Bcf per set on July 16, 2018,on five days. July 10 and July 16–19. Much higher-than-normal temperatures, structural changes to the power sector, and low natural gas prices all contributed to increased natural gas consumption by electric generators.

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