MCX Natural gas futures fall 2.58% to Rs 189.20/mmBtu this week, experts suggest buy-on-dips strategy


Natural gas futures on April 9 edged higher to settle at Rs 189.20 per mmBtu as participants increased their long positions as seen by the open interest. It has fallen by Rs 5 or 2.58 percent during the current week on the MCX.

The energy commodity has been trading higher than 5, 20 and 200 days’ moving averages but lower than the 50 and 100 days’ moving average on a daily chart for the April contract. The Relative Strength Index (RSI) is at 48.08, which indicates sideways momentum in the prices.

The US Energy Information Administration (EIA) reported that the country’s natural gas inventories rose by 20 billion cubic feet (Bcf) for the week ended April 2 in line with market expectations. Natural gas in storage was 1,784 Bcf as of April 2, 2021.

The number of rigs drilling natural gas in the US rose by 2 to 93 rigs for the week to April 9, said energy services firm Baker Hughes in a weekly report.

Natural gas demand for the residential sector decreased to 90.7 billion cubic feet (Bcf) per day compared to 92.5 Bcf in the preceding week, while the industrial sector was lower at 22.9 Bcf/d on a weekly basis, according to PointLogic Energy.

“Fundamentally for the weeks ahead, we are estimating MCX Natural Gas futures to trade sideways in expectancy of steady supplies, steady demand/usage and a small rise in inventories observed on a weekly basis,” said Sunand Subramaniam, Senior Research Associate, Choice Broking.

Subramaniam also said that the US CPC further expects extreme weather conditions for the next 6-10 days in this spring season which is expected to bring in mixed trend in prices during the week ahead. Overall, we expect a sideways trend in MCX Natural Gas in the coming week, Subramaniam noted.

MCX iCOMDEX Natural Gas Index was up 27.34 points or 1.13 percent to end at 2,445.13.

In the futures market, natural gas for April delivery touched an intraday high of Rs 190.90 and an intraday low of Rs 187.50 per mmBtu on MCX. So far in the current series, natural gas has touched a low of Rs 179.80 and a high of Rs 223.

Natural gas delivery for April gained Rs 2.60, or 1.39 percent to settle at Rs 189.20 per mmBtu with a business turnover of 13,675 lots.

Natural gas delivery for May soared by Rs 1.90, or 0.98 percent, to close at Rs 195.50 per mmBtu with a business volume of 3,257 lots.

The value of April and May’s contracts traded on April 1 was Rs 3,006.81 crore and Rs 108.39 crore, respectively.

Natural gas price settled with a mild loss of 0.04 percent quoting at $ 2.52 per mmBtu in New York.

Next Week Outlook

Kshitij Purohit, Product Manager, Currency & Commodities, CapitalVia Global Research Limited

Strategy: Traders should keep an eye on buy on dips opportunity in MCX Natural gas future from the support level of Rs 183. For this buy position, traders must keep stop loss around Rs 178 and aim at the target of Rs 196.70 for the coming week.

Rationale: The price hangs around in the small range without much volumes, the movement and volume may dry after the coming week. According to the National Oceanic Atmospheric Administration, the weather is expected to become cooler than normal for most mid-west for the next 6-10 and 8-14 days.

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