Natural Gas Rises as Warm Weather is Forecast to Cover the U.S.

Natural gas prices moved higher on Wednesday but closed off the highs of the session. Warmer than normal weather is expected to cover most of the United States for the next 8-14 days according to the National Oceanic Atmospheric Administration. Warmer than normal weather equates to higher cooling demand which in turn lifts the demand for natural gas.

Technicals

Natural gas prices moved higher climbing to 2.94, one cent shy of the 38.2% Fibonacci retracement level of the decline from the highs made in January to the lows made in February. A close above 2.95 per mmbtu would lead to a test of the 50% retracement level at 3.09.  Support is seen near the 10-day moving average at 2.84. 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).

Overall supply is flat week over week

According to data from the EIA, the average total supply of natural gas remained the same as in the previous report week, averaging 85.6 Bcf per day. Dry natural gas production decreased by 1% compared with the previous report week, largely because of Northeast production declines associated with takeaway capacity reductions from the Millennium pipeline maintenance. Average net imports from Canada increased by 1% from last week.

Demand increases

Demand increases week over week as electric power sector consumption rises. Total U.S. consumption of natural gas rose by 4% compared with the previous report week, according to data from PointLogic Energy. Natural gas consumed for power generation climbed by 8% week over week as average temperatures for the week rose higher than 75°F in parts Texas and the Southeast. Industrial sector consumption stayed constant, averaging 19.9 Bcf/d. In the residential and commercial sectors, consumption increased by 3% with much of the West and Northeast cooler this report week compared with last report week. Natural gas exports to Mexico were the same as last week, averaging 4.4 Bcf per day.