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David Becker
Natural Gas

Natural gas prices whipsawed and edged lower on Friday, following Thursday’s report from the Department of Energy that showed that inventories grew in line with expectations. The 106 BCF build was not a market mover, and the weather could influence prices over the next 2-weeks.

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Technical Analysis

Natural gas prices whipsawed, making a higher high and a higher low, but closing done on the session. When compared to the prior day, Friday’s price action was an inside day which is a sign of indecision. Support is seen near the 10-day moving average at 2.60. Resistance is seen near the May highs at 2.67, and then the 50-day moving average at 2.71. Short-term momentum is neutral, as the fast stochastic continues to whipsaw on the upper end of the neutral range near 78. Medium term momentum is positive to neutral as the MACD (moving average convergence divergence) histogram is printing in the black with a declining trajectory which points to consolidation.

The weather is expected to remain colder than normal in the west and warm than normal in the east. This could buoy both heating demand and cooling demand which might increase aggregate demand. Demand increased week over week. Total U.S. consumption of natural gas rose by 1% compared with the previous report week, according to data from the EIA. Natural gas consumed for power generation declined by 3%, and industrial sector consumption increased by 1%. In the residential and commercial sectors, consumption increased by 9%. Natural gas exports to Mexico increased 3%.

Supply remains flat in the latest week according to the EIA.  Average total supply of natural gas remained the same as in the previous report week, averaging 94.4 Bcf per day. Dry natural gas production remained constant week over week. Average net imports from Canada decreased by 4% from last week. Canadian production has been lower than normal in British Columbia and Alberta because spring breakup.

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