MCX Natural gas futures climb 6% to Rs 200/mmBtu this week, outlook bullish

Natural Gas

Natural Gas

Natural gas futures on April 16 edged higher to settle at Rs 200.20 per mmBtu as participants increased their long positions as seen by the open interest. 

It ended the week with a gain of Rs 11.1 or 5.87 percent on the MCX. Natural gas prices rose four out of the five trading sessions on the domestic bourse.

The energy commodity has been trading higher than 5, 20, 50, 100 and 200 days’ moving averages on a daily chart. The momentum indicator Relative Strength Index (RSI) is at 58.64, which indicates upbeat momentum in the prices.

The US Energy Information Administration (EIA) reported that the country’s natural gas inventories rose by 61 billion cubic feet (Bcf) for the week ended April 9 as against market expectations of a 67 Bcf rise. Natural gas in storage was 1,845 Bcf as of April 9, 2021.

The number of rigs drilling natural gas in the US increased by 1 to 94 rigs for the week to April 16, said energy services firm Baker Hughes in a weekly report.

Natural gas demand for the residential sector decreased to 88.5 billion cubic feet (Bcf) per day compared to 90.6 Bcf in the preceding week, while the industrial sector was lower at 22.6 Bcf/d on a weekly basis, according to PointLogic Energy.

“Fundamentally for the weeks ahead, we are estimating MCX Natural Gas futures to trade bullish in expectancy of steady supplies, improved 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 a bullish trend in prices during the week ahead. “Overall, we expect an upbeat trend in MCX Natural Gas in the coming week,” Subramaniam noted.

MCX iCOMDEX Natural Gas Index was up 11.26 points or 0.44 percent to end at 2,575.27.

In the futures market, natural gas for April delivery touched an intraday high of Rs 201.50 and an intraday low of Rs 198.30 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 0.70, or 0.35 percent to settle at Rs 200.20 per mmBtu with a business turnover of 12,413 lots.

Natural gas delivery for May surged by Rs 1, or 0.49 percent, to close at Rs 205.90 per mmBtu with a business volume of 8,893 lots.

The value of April and May’s contracts traded on April 1 was Rs 3,303.65 crore and Rs 158.33 crore, respectively.

Natural gas price settled with a gain of 1.05 percent at $ 2.68 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 196.10. For this buy position, traders must keep stop loss around Rs 195 and aim for the target of Rs 204 for the coming week.

Rationale: The price hangs around in the small range without many 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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