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Natural gas futures decline on lower cooling demand; buy for a target of Rs 271/mmBtu, says Choice Broking

The momentum indicator Relative Strength Index (RSI) is at 57.27, which suggests upbeat movement in the price.

Mumbai / June 18, 2021 / 04:58 PM IST
Natural Gas

Natural Gas

Natural gas futures traded weak on June 18 on prospects of lower cooling demand as heatwaves in parts of the United States subside despite EIA reporting lower inventory build. The gas prices had marginally gained 0.1 percent yesterday on the NYMEX.

The energy price extends decline in the afternoon trade on the feeble global trend.

On the MCX, natural gas delivery for June tumbled by Rs 6.20, or 2.58 percent, to Rs 234.10 per mmBtu at 15:30 hours with a business turnover of 12,844 lots.

Gas delivery for July declined Rs 6.10, or 2.52 percent, to Rs 236.20 per mmBtu with a business volume of 5,768 lots.

The value of June and July contracts traded so far is Rs 710.57 crore and Rs 171.67 crore, respectively. 

Close

MCX iCOMDEX Natural Gas Index slipped 71.87 points or 2.43 percent to 2,879.68.

The US Energy Information Administration (EIA) reported that the country's natural gas inventories rose by 16 billion cubic feet (Bcf) for the week ended June 11 against market expectations of a 72 Bcf rise. Natural gas storage was 2,411 Bcf as of June 4, 2021.

The gas prices were weighed down by switching to cheaper coal for power generation as the prices have rallied significantly in recent days.

“We are estimating MCX Natural Gas futures to trade bullish, as the weather in the United States has been reported to be warmer in the ongoing summer season which is expected to support cooling demand. With the US summer season in the middle phase, people are also expected to travel at the domestic and the international level,” Sunand Subramaniam, Senior Research Associate, Choice Broking.

“Initial estimates on June 15 showed US production at 88.9 Bcf/d, according to data compiled by S&P Global Platts Analytics. The overall demand with the reopening of the travel and tourism business in the United States is expected to further improve in the power, residential and commercial gas usage along with reports of higher inflation,” he added.

Subramaniam expects a bullish trend for the coming weeks and recommends buying in MCX Natural Gas July futures at CMP Rs 241/mmBtu for a target price of Rs 271/mmBtu and maintaining a stop loss below Rs 226/mmBtu on a closing basis.

Natural gas has been struggling for direction owing to mixed factors however we expect the price to remain supported by a small buildup In stocks and storm concerns, said Kotak Securities.

Technicals

The commodity has been trading higher than 20, 50, 100 and 200-days' simple moving averages but lower than the 5-day moving average on the daily chart. The momentum indicator Relative Strength Index (RSI) is at 57.27, which suggests upbeat movement in the price.

At 1018 GMT, the natural gas price slumped 2.37 percent at $3.17 per mmBtu in New York.

For all commodities-related news, click here

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

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