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Natural Gas Technical Analysis: The Price is Showing More Negative Signs – 21 February 2023

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The main question among commodity traders now is whether we will see a response in power generation in terms of volume to lower gas prices. It would cause a shift away from coal use, boosting inventories and thus supporting prices.

Spot natural gas prices (CFDS ON NATURAL GAS) settled down during their early trading on Tuesday, stable at their lowest level in two years.It achieved slight daily gains until the moment of writing this report, at a rate of 1.39%.It settled at a price of 2.335, after declining in yesterday’s trading and for the fourth session respectively by -1.16%. During the past week prices recorded a decline of -12.38%.

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Natural gas futures recorded a loss of nearly 10% over the past week, reflecting the sharp sell-off dominating the market in search of a fundamental response in inventories at lower price levels, to ensure that storage avoids capacity breakage before the following winter.

It comes after the US Energy Information Administration (EIA) on Thursday reported a drop of 100 billion cubic feet in domestic natural gas inventories for the week ending February 10. Working gas storage at 2.266 trillion cubic feet, higher than last year and the higher average of five years.

The main question among commodity traders now is whether we will see a response in power generation in terms of volume to lower gas prices. It would cause a shift away from coal use, boosting inventories and thus supporting prices.

Technically, the main bearish trend dominates the movement of natural gas in the medium and short term along a main slope line, as shown in the attached chart for a (daily) period. It also suffers from continued negative pressure due to its trading below the simple moving average for the previous 50-day period.

In addition to that, we note Divergence is negative in the relative strength indicators. It occurs because of reaching areas that are highly saturated with buying operations, to an exaggerated degree compared to the price movement, to confirm this with the start of negative signals from them. It doubles the negative pressures on its upcoming trades.

Therefore, our expectations indicate that natural gas will continue to decline during its upcoming trading, especially as long as it stabilizes below 2.432, to target psychological support at 2.00.

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