MCX Natural gas tumbles nearly 10% to Rs 179.80 per mmBtu this week, outlook bullish

The number of rigs drilling natural gas in the US rose by 3 at 88 rigs for the week to January 22, said Baker Hughes in a weekly report.

Mumbai / January 24, 2021 / 03:12 PM IST

Natural gas futures dropped to settle at Rs 179.80 per mmBtu on January 22 as participants reduced their position as seen by the open interest. Natural gas price tanked Rs 19.80, or 9.92 percent, during the week on the MCX.

Natural gas prices fell on all five trading sessions on the Indian bourse.

"Fundamentally for the weeks ahead, we are estimating MCX Natural Gas futures to trade bullish in expectancy of steady supplies, better demand/usage and fall in inventories observed on a weekly basis. Natural gas inventories have showcased a seasonal fall to 3,083 billion cubic feet, lower compared to previously reported inventories of 3,270 billion cubic feet," Sunand Subramaniam, Senior Research Associate, Choice Broking, said.

"The US CPC expects developed weather conditions for the next 6-10 days, which is expected to support prices in the week ahead. Overall, we expect bullish-trend in MCX Natural Gas futures in the coming week”, he said.

The demand for natural gas has been lower last week amid a slight increase in power demand to 112.7 billion cubic feed per day (Bcf/d) last week compared 118.2 Bcf/d in the prior week, according to PointLogic Energy.

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Natural gas consumption in the industrial sector has been slightly lower at 24.7 Bcf/d on a weekly basis.

The US Energy Information Administration (EIA) reported that US natural gas inventories decreased by 187 Bcf for the week ended January 15 to 3,009 Bcf. However, the stocks were 198 Bcf above the five-year average of 2,811 Bcf.

The number of rigs drilling natural gas in the US rose by 3 at 88 rigs for the week to January 22, said Baker Hughes in a weekly report. The rigs count rose for the third consecutive week.

MCX iCOMDEX Natural Gas Index eased 9.98 points, or 0.44 percent to close at 2,258.65.

In the futures market, natural gas for January delivery touched an intraday high of Rs 182.10 and an intraday low of Rs 176.40 per mmBtu on MCX. So far in the current series, natural gas has touched a low of Rs 167.40 and a high of Rs 255.90.

Natural gas delivery for January slipped Rs 0.90, or 0.50 percent, to settle at Rs 179.80 per mmBtu with a business turnover of 4,278 lots. While delivery for February decreased Rs 0.40, or 0.22 percent, to close at Rs 181.50 per mmBtu, with a business volume of 9,518 lots.

The value of January and February’s contracts traded on Friday was Rs 3,692.64 crore and Rs 696.64 crore, respectively.

Kshtij Purohit, Product Manager Currency & Commodities, CapitalVia Global Research Limited said, “During the week, natural gas prices have broken down considerably to slice through the $2.60 level, and then hit the $2.40 level. All things being equal, you can make a case for a bit of a head and shoulders when you look at the longer-term map, and then we might see a bit of a trade-out.”

“Since we are trading the March contract, this makes quite a bit of sense. A collapse below the level of $2.30 could again open up a step down towards the lows, maybe going as low as the level of $1.60. That being said, it does not necessarily mean that we get there immediately, but as temperatures rise, natural gas demand will, of course, plunge”, Purohit noted.

Natural gas price end with a loss of 1.65 percent quoting at $2.45 per mmBtu in New York.

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Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Sandeep Sinha
first published: Jan 24, 2021 03:12 pm

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