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Natural Gas Consolidates in Light Volume

David Becker

Natural gas prices edged slightly higher on low volume on Wednesday forming an inside day which is a higher low and a lower high which is generally a sign of indecision. However, prices rallied nearly 4%, following Monday’s slide.   Support increased slightly this past week while demand where flat. Trader’s await the energy departments release of US stockpiles which is expected to show a decline of 58 Bcf according to estimize.

Technical Analysis

Natural gas prices traded sideways, and appears to be forming a wide bull flag pattern which is a pause that refreshes higher. Prices recaptured the 10-day moving average which is short-term support seen near 4.46. Resistance is seen near the November highs at 4.92. Momentum has turned negative as the MACD (moving average convergence divergence) index generated a crossover sell signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses below the MACD signal line (the 9-day moving average of the MACD line). Momentum as reflected by the fast stochastic is flat as the index print near the zero line with a flat trajectory.


Support Increased Slightly While Canadian Imports Rise

Supply increases slightly as both production and net Canadian imports rise. According to the EIA, the average total supply of natural gas rose by 1%, averaging 92.9 Bcf per day, compared with the previous report week. Dry natural gas production grew by 1%, averaging 88.5 Bcf per day, and average net imports from Canada increased by 1% from last week.

Natural Gas Demand was Flat

Natural gas demand remains unchanged. Total U.S. consumption of natural gas was unchanged from the previous report week, averaging 84.2 Bcf per day, according to data from the EIA. Natural gas consumed for power generation declined by 4% week over week. Industrial sector consumption stayed constant, and consumption in the residential and commercial sectors increased by 4%. Natural gas exports to Mexico decreased 1%. Despite the flat demand, inventories remain below the 5-year average range which could push prices back to the 5-year highs near 6.90.

This article was originally posted on FX Empire