Natural gas futures decline 2.73% to Rs 188.90 per mmBtu on weak demand

Natural gas futures slumped to Rs 188.90 per mmBtu on April 5 as participants increased their short positions as seen by the open interest. The price had risen 4.47 percent last week on the MCX.

The energy commodity extended decline after a gap-down start in the afternoon session to trade at day’s low, tracking negative global trends.

The commodity has been trading higher than 20 and 200 days' moving averages but lower than the 5, 50 and 100 days’ moving average on a daily chart. The Relative Strength Index (RSI) is at 45.86 which indicates weak momentum in the prices.

The number of rigs drilling natural gas in the US fell by 1 to 91 rigs for the week to April 1, said energy services firm Baker Hughes in a weekly report. 

The weather is expected to be warmer than normal over the next 6-10 days, which is likely to reduce heating demand.

Kshitij Purohit, Product Manager, Currency and Commodities, CapitalVia Global Research Limited, said, “The EIA reported on Thursday that domestic supplies of natural gas rose 14 Bcf for the week ended March 26. That compares with an average increase of 19 Bcf forecast by analysts polled by S&P Global Platts.”

Support for natural gas is at Rs 189 levels.  Below that, it may go towards Rs 186 levels whereas resistance for the energy commodity is at Rs 198, Purohit noted.

MCX iCOMDEX Natural Gas Index was down 68.67 points or 2.73 percent to 2,447.59.

In the futures market, natural gas for April delivery touched an intraday high of Rs 191.80 and an intraday low of Rs 188.80 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 slipped Rs 5.30, or 2.73 percent, to Rs 188.90 per mmBtu at 14:33 hours IST with a business turnover of 15,100 lots.

Natural gas delivery for May fell Rs 5.20, or 2.62 percent, to Rs 193.50 per mmBtu with a business volume of 1,974 lots.

The value of April and May’s contracts traded so far is Rs 930.42 crore and Rs 52.41 crore, respectively.

At 09:02 (GMT), the natural gas price dropped 2.58 percent quoting at $2.57 per mmBtu in New York.

Trading Strategy

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

Traders should keep an eye on the sell-on-rise opportunity in MCX Natural gas future from the resistance level around Rs 197-195. For this sell position, traders should keep stop loss around Rs 200.10 and aim the target beyond Rs 179.80 for the coming week.

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