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David Becker
Oil platform

Natural gas prices were hammered on Thursday following a larger than expected build in natural gas inventories according to a report released by the US Department of Energy. Prices dropped more than 10% but settled above support. Storm in the Gulf of Mexico continues to be active with a disturbance that has a 90% chance of turning into a tropical cyclone in the next 48-hours. There is an active storm in the Atlantic as well but only one looks like it will make it over to the Gulf of Mexico and potentially generate issues for natural gas infrastructure.

Technical Analysis

Natural gas prices dropped sharply but held in above support near an upward sloping trend line that comes in near 1.97. Resistance is seen near the 50-day moving average at 2.25. Short term momentum is negative as the fast stochastic generated a crossover sell signal. The current reading on the fast stochastic is 6, below the oversold trigger level of 20 which could foreshadow a correction. Medium-term momentum is also negative as the MACD (moving average convergence divergence) histogram prints in the red with a downward sloping trajectory which points to lower prices.

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Inventories Rise More than Expected

The EIA reported that natural gas in storage was 3,614 Bcf as of Friday, September 11, 2020. This represents a net increase of 89 Bcf from the previous week. Expectations were for a 78 BCF increase according to survey provider Estimize. Stocks were 535 Bcf higher than last year at this time and 421 Bcf above the five-year average of 3,193 Bcf. At 3,614 Bcf, total working gas is above the five-year historical range.

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