Natural Gas
Natural gas prices weakened 0.41 percent this week to settle at Rs 216.40 per mmBtu on the MCX. The energy price fell in three out of five trading sessions on the domestic bourse.
The weather is expected to be warmer than normal over the next two weeks but not warm enough that it will impact cooling demand.
It has been trading higher than its 20, 50, 100 and 200 days’ moving averages but lower than the five-day moving average on a daily chart. The momentum indicator Relative Strength Index (RSI) is at 57.66, which indicates upbeat momentum in the prices.
US LNG exports were larger than expected in the latest week and lent support.
The EIA reported that the US natural gas inventories increased by 71 billion cubic feet (Bcf) for the week ended May 7 as against market expectations of a 71 Bcf rise. Natural gas in storage was 2,029 Bcf as of May 7, 2021.
In its weekly report, Baker Hughes said the number of rigs drilling natural gas in the US fell by 3 to 100 rigs for the week to May 14.
Natural gas demand for the residential sector increased to 89.1 billion cubic feet (Bcf) per day compared to 84.8 Bcf in the preceding week, while the industrial sector has been higher at 22.1 Bcf/d on a weekly basis, according to PointLogic Energy.
“Fundamentally for the weeks ahead, we are estimating MCX Natural Gas futures to trade volatile in expectancy of steady supplies, mixed demand/usage and a small rise in inventories observed on a weekly basis,” said Sunand Subramaniam, Senior Research Associate, Choice Broking.
Kshitij Purohit, Product Manager, Currency and Commodities, CapitalVia Global Research Limited said, “Natural gas prices attempted to break out on Friday but failed to push through resistance and fell back to short-term support. The weather is expected to remain warmer than normal for most of the next two weeks, which could put some upward pressure on cooling demand.”
MCX iCOMDEX Natural Gas Index was down 19.62 points or 0.72 percent to end at 2,717.08.
In the futures market, natural gas for May delivery touched an intraday high of Rs 221 and an intraday low of Rs 215.80 per mmBtu on MCX. So far in the current series, natural gas has touched a low of Rs 184.10 and a high of Rs 222.90.
Natural gas delivery for May slides Rs 1.90, or 0.87 percent to settle at Rs 216.40 per mmBtu with a business turnover of 16,682 lots.
Natural gas delivery for June eased by Rs 1.70, or 0.76 percent, to close at Rs 221.40 per mmBtu with a business volume of 4,962 lots.
The value of May and June’s contracts traded on Friday was Rs 4,230.56 crore and Rs 348.34 crore, respectively.
Natural gas price settled with a mild loss of 0.07 percent at $ 2.97 per mmBtu in New York.
Outlook and Strategy
Sriram Iyer, Senior Research Analyst at Reliance Securities
“Natural gas prices could continue to remain range-bound to firm next week. Cooling demand will lend support while cues on the weather and inventories next week will have an impact on prices.”
Technically, NYMEX Natural gas could trade in a range of $ 2.80-3.30 levels. While May MCX Natural gas could see a sideways to marginal upside momentum in coming where Rs 223-230 levels will hold resistance and support is at Rs 212-205 levels.
Reliance Securities advised its clients to buy Natural Gas May near Rs 217 on dips with a stop loss at Rs 212 and a target at Rs 227.
Traders should keep an eye on the buy-on-dips opportunity in MCX Natural gas future from the resistance level around Rs 214.70-215.10 with a stop loss around Rs 210 and aim the target at Rs 223.40 for the coming week, said Purohit.
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