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David Becker

Natural gas prices attempted to move higher but ran into resistance and slumped into the close of the trading session. Demand continues to remain under pressure as lower power generation has reduced turbine activity. With commercial building still in the process of opening up, demand is likely to remain under pressure for a while.

Technical Analysis

Natural gas prices whipsawed initially moving higher and running into resistance near the 10-day moving average at 1.78. Prices closed lower on the session. Support is seen near the June lows at 1.68. Short term momentum remains negative as the fast stochastic generated a crossover sell signal. The fast stochastic is printing a reading of 16, below the oversold trigger level of 20 which could foreshadow a correction. Medium-term momentum remains 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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Demand Remains soft

Demand falls because of the lower power generation according to the EIA. Total U.S. consumption of natural gas fell by 7.1% compared with the previous report week. Natural gas consumed for power generation declined by 15.6% week over week as mild temperatures limited demand for electric power. In the residential and commercial sectors, consumption increased by 4.8% because of mixed heating and cooling demand. Industrial sector consumption increased by 2.2% week over week. Natural gas exports to Mexico decreased 4.7%.

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