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Natural Gas Price Prediction – Prices Continue to Trend Lower

Natural gas prices formed an outside day. This occur when the high was higher than the prior days high and the low was lower than the prior days low, as the close was lower. This is generally considered a reversal signal, but in this case its only reversing Monday’s up move.  The downtrend is still intact, and will likely continue. The weather continues to point to cooler than normal temperatures throughout most of the mid-west and the pattern is moving eastward. This should reduce cooling demand during the height of the summer.

Target support on natural gas prices are seen near an upward sloping trend line that comes in near 2.67. Resistance is seen near the 10-day moving average at 2.80. Momentum remains negative as the MACD (moving average convergence divergence) histogram prints in the red with a downward sloping trajectory which points to lower prices. The fast stochastic is also trending lower which reflects accelerating negative momentum. The only caveat is that the current reading on the fast stochastic is 3, well below the oversold trigger level of 20, which could foreshadow a correction.

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Inventories are Low

The EIA is estimating that working gas deficit to the five-year average is growing. Net injections into storage totaled 51 Bcf for the week ending July 6, compared with the five-year average net injections of 77 Bcf and last year’s net injections of 59 Bcf during the same week. Warmer-than-normal temperatures throughout the Lower 48 states contributed to increased power demand for natural gas for air conditioning, but traders are betting that the cooling weather will reduce demand. Working gas stocks totaled 2,203 Bcf, which is 519 Bcf lower than the five-year average and 725 Bcf lower than last year at this time.

Overall supply decreases

According to data from the EIA the average total supply of natural gas fell by 1% compared with the previous report week. Dry natural gas production remained constant week over week while average net imports from Canada decreased by 5% from last week. U.S. LNG exports increase week over week. Six LNG vessels departed the United States from July 5 through July 11 according to the Energy Information Administration.

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This article was originally posted on FX Empire

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