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David Becker

Natural gas prices rebounded from session lows as colder than expected weather is forecast to move across most of the west coast of the US over the next 6-10 and 8-14 days. The cold weather is expected to be offset by warmer than normal weather that will cover the east coast and the mid-west of the US during the same period. Demand in the US fell led by the lack of heating in commercial buildings.

Technical Analysis

Natural gas prices whipsawed, forming an outside reversal day initially moving lower and testing the 2016 lows at 1.61, before reversing course and rallying more than 4%. This points to a reversal. The whipsaw price action allowed natural gas to recapture resistance which is now short term support near the 10-day moving average at 1.77. Short term momentum has turned positive as the fast stochastic generated a crossover buy signal. The RSI diverged which is also a reflection of accelerating positive momentum. The MACD (moving average convergence divergence) index also generated a crossover buy signal which points to higher prices.

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Demand declined

Demand fell in the latest week driven by declines for heating demand in buildings. Total U.S. consumption of natural gas fell by 8% compared with the previous report week, according to data from the EIA. In the residential and commercial sectors, consumption declined by 14%. Natural gas consumed for power generation declined by 4% week over week. Industrial sector consumption decreased by 3% week over week. Natural gas exports to Mexico increased by 3%.

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