Natural Gas Prices Drop Sharply and are No Longer Overbought

Key Insights

• Natural gas prices dropped sharply.
• The weather is expected to be colder than normal over the next 2-weeks.
• LNG shipments declined because of poor weather in the Gulf of Mexico.

On Tuesday, natural gas prices dropped sharply, falling 8.5% after hitting a 13-year on Monday. LNG demand remains strong, and natural gas arrivals at LNG terminals continue to climb. The weather is expected to be colder than average during the next two weeks enhancing natural gas demand.

U.S. LNG exports decrease by four vessels this week from last week. According to the EIA, twenty LNG vessels combined with a combined LNG-carrying capacity of 75 Bcf departed the United States between April 7 and April 13. Bad weather in the Gulf of Mexico, which included high winds and waves of up to 7 feet and planned maintenance, resulted in lower LNG shipments this week.

Technical Analysis

Natural gas prices fell on Tuesday. Support is seen near the 10-day moving average at 6.72.   Target resistance is seen near the July 2008 highs at 13.68.

Short-term momentum has reversed and turned negative as the fast stochastic generated a crossover sell signal. Prices have declined out of the overbought territory for both the fast stochastic and the relative strength index.

Medium-term momentum has turned positive. The MACD (moving average convergence divergence) histogram is printing in positive territory with an upward sloping trajectory which points to an acceleration in the underlying price of natural gas.