Natural Gas Rise 10.3% for the Week, and Poised to Test Higher Levels

Key Insights

• Natural Gas prices hit a fresh 13-year high but closed lower on profit-taking.
• The rig count rose
• The weather is expected to be colder than average in the U.S.

On Friday, natural gas prices hit a 13-year high but closed lower. For the week, prices were up 10%. Demand remains strong as natural gas arrivals at LNG terminals continue to rise. The weather is expected to be much colder than average on the West Coast and then moderate and spread and be colder than usual throughout the United States for the next two weeks.

According to the EIA, the natural gas supply rose slightly this week. The average total supply of natural gas rose by 0.8% week over week. Dry natural gas production grew by 0.8% compared with the previous report week, and average net imports from Canada increased by 1.9%. According to Baker Hughes, the rig count rose by 3 in the latest week and is up 48-rigs year over year.

Technical Analysis

Natural gas prices broke out to fresh 13-year highs but settled way off the session’s highs as traders took profits. The trend points to higher prices as the weekly chart points to a clear breakout in natural gas. Target resistance is seen near the July 2008 highs at 13.68. Support is seen near the 10-day moving average at 5.82.

Short-term momentum has turned positive as the fast stochastic generated a crossover buy signal. The fast stochastic is printing a reading of 97, above the overbought trigger level of 80.

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.