Natural Gas Rebounds as Supply is Flat and Demand is falling

Natural gas prices rebounded on Monday, but remain range-bound after falling hard in February.  Demand continues to fall and supply remain flat. Hedge funds exited long position in futures and options according to the latest industry report. Colder than normal weather is forecast to cover most of the United States over the next 8-14 days, which could increase heating demand during a month where storage withdrawals generally end.

Technicals

Natural gas prices rebounded into the close, holding near the 10-day moving average at 2.69. Resistance is seen near a downwards sloping trend line that comes in near 2.75. Support is seen near an upward sloping trend line near 2.59. Prices are forming a bear wedge pattern, as it attempts to form a bottom. Momentum is neutral as the MACD (moving average convergence divergence) histogram prints in the black with a flat trajectory which reflects consolidation.

Supply remains flat

According to data from the EIA, the average total supply of natural gas remained the same as in the previous report week, averaging 85.8 Bcf per day. Dry natural gas production increased by an average of 0.4 Bcf/d week over week. Average net imports from Canada decreased by 5% from last week.

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Demand falls

Total U.S. consumption of natural gas fell by 6% compared with the previous report week, according to data from the EIA. Natural gas consumed for power generation declined by 2% week over week. Industrial sector consumption decreased by 1% week over week. In the residential and commercial sectors, consumption declined by 13%, as weather was warmer than normal in California and across the south and close to normal on the eastern seaboard. Natural gas exports to Mexico decreased 9% because of maintenance on the Los Ramones pipeline in Mexico. Mexico has pushed the in-service date for the El Encino-La Laguna pipeline back to October 2018, which may affect export growth from the Permian basin.