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David Becker

Natural gas prices whipsawed initially rallying as oil prices surged. Prices closed near the lows of the session creating a higher high and a lower low which is an outside day. This is generally a signal of a reversal but prices have been consolidating. Baker Hughes reported that the number of natural gas rigs declined by 1 in the latest week. This compares to a 16 rig decline in oil. The weather is expected to be cooler than normal over the next two weeks through the mid-west of the country. US jobs numbers surged higher buoying riskier asset, but this failed to buoy natural gas prices.

Technical Analysis

Natural gas prices attempted to rally but ran into resistance near the 10-day moving average at 1.93, and fell back below former trend line support. Support is seen near the June lows at 1.84. Short-term momentum is neutral as the fast stochastic continues to flip flop making buy and sell signals. Medium-term momentum is negative but turning neutral as the MACD (moving average convergence divergence) histogram prints in the red with a rising trajectory which points to consolidation.

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Inventories are Rising with an Upward Trajectory

Despite a stronger than expected jobs report, natural gas inventories remain elevated due to despite in electrical generation. US Natural gas in storage was 2,714 Bcf as of Friday, May 29, 2020, according to the EIA. This represents a net increase of 102 Bcf from the previous week. Expectations were for a 109 Bcf build. Stocks were 762 Bcf higher than last year at this time and 422 Bcf above the five-year average of 2,292 Bcf. At 2,714 Bcf, total working gas is within the five-year historical range.

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