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Natural Gas Could Take a Tumble

David Becker
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Natural gas prices have climbed to their highest levels since 2010, with Henry Hub NYMEX natural gas topping 5.4 per MMBtu in February, but as weather becomes milder in the spring, it might be difficult for this heating fuel to remain elevated.

The National Weather Service predicts that mild weather will not cover the US over the next 10-14 days. Natural gas is a domestic fuel so it is generally not influenced by demand outside of the US. The flow will move from what the weather services calls ridge trough where cold air from Canada dips into the US, to zonal flow where mild weather from California moves slowly across the country from west to east.

Prices of petroleum remain high but recent builds in distillates and a reduction in demand has pushed prices lower. The benefit natural gas futures were getting from high petroleum prices will likely be curtailed in the near future.

April natural gas futures prices moved lower on solid volume and negative momentum. The MACD (moving average convergence divergence) index generated a sell signal as the spread (the 12-day moving average minus the 26-day moving average) crossed below the 9-day moving average of the spread. The index moved from positive to negative territory confirming the sell signal. The RSI (relative strength index) moved lower with price action reflecting accelerating negative momentum while printing near 54, which is in the middle of the neutral range.

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