Natural gas prices broke down on Friday, as warmer than expectred weather is expected to cover most of the United States, reducing cooling demand as the end of the withdrawal season. Stronger supply and countering demand are keeping natural gas prices capped. While inventories are above the 5-year average ragne, robust production will likely keep prices capped going into the injection season.
Natural gas prices tumbled through trend line support and are now target support near the February lows at 2.54. Resistance is seen near former support which is now resistance seen near 2.81. Additional resistance is seen near the 10-day moving average at 2.82. 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). The MACD histogram is printing in the red with a downward sloping trajectory which points to lower prices and accelerating negative momentum.
Over the past 7-year, since horizontal drilling and hydraulic fracturing techniques became more common, U.S. production of natural gas plant liquids has significantly increased, averaging 4.3 million barrels per day in 2018, up from 2.5 million in 2012. This has also lead to a rise in the amount of natural gas produced, which has been countered by robust electricity consumption.
Natural gas consumption in the electric power sector, or power burn, reached record levels in 2018, according to the EIA. Its been growing more than any other end-use sector. Power burn increased by 15% in 2018 relative to 2017 and was nearly 18% higher than the previous five-year average.
This article was originally posted on FX Empire
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