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David Becker
Natural Gas
Natural Gas

Natural gas prices whipsawed on Thursday following a larger than expected build in natural gas inventories.  Prices had been surging higher over the past week, as colder than normal weather is expected to cover most of the Midwest of the United States for the next 2-weeks. The colder than normal weather should buoy heating demand ahead of the withdrawal season that could see storage move very low levels. Demand for natural gas is on the rise. According to EIA’s Natural Gas Monthly, natural gas consumption and exports averaged 93.4 billion cubic feet per day during the first half of 2018, or 12% greater than during the first half of 2017.

Technical Analysis

Prices dumped lower following the larger than expected build in inventories but held support above the 10-day moving average at 3.09. Resistance is seen near the October highs at 3.26. Prices briefly were overbought as the RSI (relative strength index) printed a reading above 70, which could foreshadow a correction. Positive momentum is decelerating as the MACD (moving average convergence divergence) histogram prints in the black with a declining trajectory which points to consolidation.

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Inventories Grew More than Expected

Natural gas inventories rebounded from last week miss, by notching up gains above what was expected. According to the Energy Information Administration, working gas in storage was 2,866 Bcf as of Friday, September 28, 2018. This represents a net increase of 98 Bcf from the previous week. This compares to expectations that inventories would climb by 88Bcf. Stocks were 636 Bcf less than last year at this time and 607 Bcf below the five-year average of 3,473 Bcf. At 2,866 Bcf, total working gas is below the five-year historical range. The colder than normal weather could generate significant demand which could further reduce inventories ahead of the withdrawal season which begins on November 1.

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