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Natural Gas Price Prediction – Prices Surge and Poised to Test Higher Levels

Natural gas prices continued to breakout on Monday, after pausing on Friday.  Colder than normal weather is expected to cover most of the United States for the next 2-weeks. Inventories remain below the 5-year average range while prices remain below the 5-year average price. There are a few tropical disturbances in the Atlantic, but few are headed toward US natural gas infrastructure and should not generate volatility.

Technical Analysis

Natural gas prices surged higher on Monday, hitting a fresh 2-month high and are poised to target higher levels.  Resistance is seen near the June highs at 3.05 and a break of this level would lead to a test of target resistance near 3.60.  Support is seen near former resistance at 3.0. Momentum has turned positive as the MACD (moving average convergence divergence) index generated a crossover buy signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses above the MACD signal line (the 9-day moving average of the MACD line). The MACD histogram is printing the black with an upward sloping trajectory which points to higher prices. The RSI (relative strength index) broke out which reflects accelerating positive momentum. The current reading on the RSI is 65, still below the oversold trigger level of 70.

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Demand Rises Ahead of the Withdrawal Season

Demand rises, driven by consumption in the electric power sector. Total U.S. consumption of natural gas rose by 5% compared with the previous report week, according to the EIA. Natural gas consumed for power generation climbed by 14% week over week. Industrial sector consumption decreased by 2% week over week. In the residential and commercial sectors, consumption declined by 12%. Natural gas exports to Mexico were the same as last week, averaging 4.7 Bcf per day. The withdrawal season begins October 31, and a cold snap could actually generate a draw ahead of schedule.

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This article was originally posted on FX Empire

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