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MCX natural gas futures rise 2.4% to Rs 217.50/mmBtu; experts advise sell-on-rise strategy

NYMEX Natural Gas could trade in the range of $2.75-$3.35 levels in the coming week.

Mumbai / May 29, 2021 / 04:01 PM IST

Natural gas soared 2.4 percent to end at Rs 217.50 per mmBtu on the MCX in a choppy trading week. The energy price rose in three out of five trading sessions on the domestic bourse.

The energy commodity has been trading higher than 5, 20, 50, 100 and 200 days' simple moving averages and exponential moving average on a daily chart. The momentum indicator Relative Strength Index (RSI) is at 53.79, which indicates neutral movement in the prices.

The US Energy Information Administration (EIA) reported that the country's natural gas inventories increased by 115 billion cubic feet (Bcf) for the week ended May 21 as against market expectations for a build of 90 Bcf. Natural gas in storage was 2,215 Bcf as of May 21, 2021.

In its weekly report, Baker Hughes said the number of rigs drilling natural gas in the US fell by 1 to 98 rigs for the week to May 28.

Natural gas demand for the power sector increased to 82.7 billion cubic feet (Bcf) per day compared to 80.6 Bcf in the preceding week, while the industrial sector was lower at 20.7 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, higher 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 warmer weather conditions for the next 6-10 days in the upcoming summer season which is expected to bring a bullish trend in prices during the week ahead. "Overall, we expect a bullish trend in MCX Natural Gas in the coming week," Subramaniam noted.

Natural Gas Intelligence (NGI) said LNG feed gas flows hovered near 10.6 Bcf on Tuesday, still down from recent highs above 11 Bcf. 

MCX iCOMDEX Natural Gas Index climbed 36.80 points or 1.40 percent to close at 2,671.69.

In the futures market, natural gas for June delivery touched an intraday high of Rs 221.20 and an intraday low of Rs 214.60 per mmBtu on MCX. So far in the current series, natural gas has touched a low of Rs 193 and a high of Rs 236.10.

Natural gas delivery for June gained Rs 2.70, or 1.26 percent to settle at Rs 217.50 per mmBtu with a business turnover of 11,800 lots.

Natural gas delivery for July jumped by Rs 2.50, or 1.15 percent, to close at Rs 219.90 per mmBtu with a business volume of 1,421 lots.

The value of June and July’s contracts traded on Friday was Rs 3,759.97 crore and Rs 154.41 crore, respectively.

Natural gas price settled with a gain of 1.83 percent at $3.01 per mmBtu in New York.

Next Week Outlook

Sriram Iyer, Senior Research Analyst at Reliance Securities said, “Natural gas prices again track the weather and inventories next week. Hot weather could inject cooling demand. However, with the hurricane season starting in the US, we have to wait and watch how the weather impacts demand.”

Kshitij Purohit, Product Manager, Currency & Commodities, CapitalVia Global Research Limited said, “Natural gas markets have been slightly positive during the week after gapping lower, showing signs of hesitancy to get above the Rs 220 level. At this point, the market is likely to see a lot of choppy behaviour, as we go looking towards the bottom of the range near Rs 200 mark.”

Strategy and Recommendation

“Technically, NYMEX Natural Gas could trade in a range of $2.75-$3.35 levels in the coming week. Domestically, MCX Natural Gas June could see a sideways to marginal downside momentum in the coming week where Rs 221-227 levels will hold resistance and support is at Rs 213-208 levels,” Iyer added.

Reliance Securities advised its clients to sell Natural Gas June near Rs 221 with a stop loss at Rs 226 and a target at Rs 211.

Purohit said, “Traders should keep an eye on sell-on-rise opportunity in MCX Natural gas futures from the resistance level around Rs 218.70 – 219.10. For this sell position, traders should keep a stop loss around Rs 222.70 and target Rs 207.70 for the coming week.

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Sandeep Sinha