Natural gas futures rise for 7th straight day on higher cooling demand; prices tied at Rs 305-307 levels

Natural gas futures price traded higher for the seventh successive day on short-covering of positions by participants as seen by the open interest. The gas price had risen 1 percent yesterday on the NYMEX.

The energy commodity extended gains to trade at day’s high after a flat to gap-down start, tracking the firm overseas cues.

On the MCX, natural gas delivery for August soared Rs 1.90, or 0.63 percent, to Rs 305.20 per mmBtu at 14:29 hours with a business turnover of 15,373 lots.

Gas delivery for September advanced Rs 1.70, or 0.56 percent, to Rs 305.30 per mmBtu with a business volume of 1,851 lots.

The value of August and September's contracts traded so far is Rs 713.21 crore and Rs 25.48 crore, respectively.

MCX iCOMDEX Natural Gas Index rose 21.99 points or 0.59 percent to 3,728.71.

Sriram Iyer, Senior Research Analyst at Reliance Securities said, “International natural gas futures have started flat to positive this Tuesday morning and early afternoon in Asian trade. However, the downside could be capped as warm weather in the US could buoy cooling demand.”

“Technically, NYMEX Natural Gas could trade in a range of $3.950-4.200 levels. On the domestic front, MCX Natural Gas July hold strong support near Rs 297-300 levels. Resistance is at Rs 305-307 levels”, he said.

Kshitij Purohit, Product Manager, Currency & Commodities, CapitalVia Global Research Limited said, “MCX Natural gas is trading with sideways to a marginally bullish trend, keeping support of Rs 298.60 of the previous session. If the price breaks below the support level, we may expect more bearish momentum towards Rs 290 by evening session.”

Warmer than normal weather is expected to cover most of the United States over the next 6-10 and 8-14 days. As per National Oceanic Atmospheric Administration (NOAA), there is one tropical storm in the Atlantic or Gulf of Mexico that has a 10 percent chance of becoming a tropical cyclone over the next 48 hours.

Also supporting the gas price is higher US LNG exports amid higher global prices.

Natural gas consumption in the electric power sector drives total consumption higher. Total US consumption of natural gas rose by 1.5 percent compared with the previous report week, according to data from the EIA.

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 RSI is at 79.12, which suggests an overbought level in the price.

Natural gas remains on an upward trend however the rally seems overstretched and may struggle to continue amid mixed factors. We may see volatile trade also as market players square off positions ahead of contract expiration, said Kotak Securities.

At 09:15 GMT, the natural gas price gained 0.24 percent at $4.09 per mmBtu in New York.

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