Natural gas futures jump over 2% on higher cooling demand; trades above key averages

Natural gas futures soared on June 8 on expectations of pick up in cooling demand on warmer weather conditions. The price had declined 0.9 percent yesterday on the NYMEX.

The energy price extended gains to trade at day’s high in the afternoon session tracking firm global cues.

On the Multi-Commodity Exchange (MCX), natural gas delivery for June climbed by Rs 4.80, or 2.16 percent, to Rs 227.40 per mmBtu at 1426 hours with a business turnover of 20,451 lots.

Gas delivery for July gained Rs 4.20, or 1.87 percent, to Rs 228.90 per mmBtu with a business volume of 2,843 lots.

The value of June and July contracts traded so far is Rs 751.90 crore and Rs 54.79 crore, respectively. 

MCX iCOMDEX Natural Gas Index increased 57.66 points or 2.11 percent to 2,788.23.

Sriram Iyer, Senior Research Analyst at Reliance Securities said, “International natural gas futures have started with gains this Tuesday morning and early afternoon in Asian trade. Technically, NYMEX Natural Gas could trade in a range of $3-3.25 levels.”

On the domestic front, MCX Natural Gas June holds strong support near Rs 221-218 levels. Resistance is at Rs 224-226 levels, Iyer added.

“MCX Natural gas June is sustaining the support of 15-SMA on an hourly chart placed near Rs 223.60. The resistance holds near the previous week’s high at Rs 227.45 and if the price breaks through this level, we may expect bullish momentum towards Rs 229.90-231.50,” said Kshitij Purohit, Product Manager, Currency & Commodities, CapitalVia Global Research Limited. 

According to the National Oceanic Atmosphere Administration, the weather is expected to be warmer than normal during the next two weeks.

US gas stocks are still in deficit despite a bigger than average buildup in the last few weeks while rig count has declined for four straight weeks.

There is a mixed bag of factors which means that natural gas may continue to trade in a range however the general bias may be on the upside amid hopes of higher weather-related demand in coming days, said Kotak Securities.

Technicals

The commodity has been trading higher than 5, 20, 50, 100 and 200-days simple moving averages and exponential moving averages on the daily chart. The momentum indicator Relative Strength Index (RSI) is at 57.64, which suggests positive movement in the price.

At 0908 GMT, the natural gas price rose 1.63 percent to quote at $3.12 per mmBtu in New York.

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