Natural gas futures modestly lower after sharp rally; bullish momentum expected

Natural gas futures declined marginally on July 9 after a sharp rally in yesterday's session on the smaller-than-expected build in US gas stockpiles. The gas prices had soared 2.56 percent yesterday on the NYMEX.

The energy price extended decline after a flat to negative start tracking the muted overseas trend.

On the MCX, natural gas delivery for July dropped Rs 0.60, or 0.22 percent, to Rs 274.90 per mmBtu at 14:36 hours with a business turnover of 16,272 lots.

Gas delivery for August fell 0.40 percent to Rs 274.00 per mmBtu with a business volume of 2,041 lots.

The value of July and August's contracts traded so far is Rs 678.86 crore and Rs 43.36 crore, respectively.

MCX iCOMDEX Natural Gas Index eased 7.93 points or 0.24 percent to 3,348.04.

“NYMEX Natural Gas prices have started flat to marginally lower this Friday morning and early afternoon in Asian trade. Technically, NYMEX Natural Gas supports are at $3.580 and $3.470 whereas resistances are at $3.759 and $3.829 levels,” said Sriram Iyer, Senior Research Analyst at Reliance Securities

“On the domestic front, MCX Natural Gas July supports are Rs 267.73 and Rs 259.97. Resistances are at Rs 280.83 and Rs 286.17,” he added.

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 July 2 against market expectations of a 34 Bcf rise. Natural gas in storage was at 2,574 Bcf as of Friday.

The weather is expected to remain warmer than normal for the next two weeks on both the east coast and west coast of the United States, putting upward pressure on cooling demand.

Technicals

The commodity has been trading higher than 20, 50, 100 and 200 days' simple moving averages and but lower than the 5-day moving averages on the daily chart. The momentum indicator RSI is at 67.08, which suggests bullish movement in the price.

Natural gas has bounced back from the lows; however, mixed factors indicate that choppy trade is likely. The general bias however may be on the upside amid tightening US gas stocks. Focus may continue on the US weather, trend in energy price, storm activity in Atlantic and weekly rig activity report, said Kotak Securities.

At 0922 GMT, the natural gas price modestly down 0.14 percent at $3.68 per mmBtu in New York.

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