Natural gas futures plunged on Thursday a day after hitting the highest level since August 2008. Russian President Vladimir Putin on Wednesday made a conditional offer to pump more gas to Europe to stabilise the price that led to a rush to book profits.
The gas price tumbled 10.09 percent on October 6 on the NYMEX and gave up all the gains it made on Tuesday.
The energy commodity extended its fall to trade at near the day’s low in the afternoon session, tracking muted overseas cues. It has shed 14.48 percent so far from the high it made on Wednesday.
On the MCX, natural gas delivery for October slumped Rs 16.30, or 3.78 percent, to Rs 414.60 per mmBtu at 1442 hours with a business turnover of 5,028 lots.
Gas delivery for November plummets by Rs 16.60, or 3.76 percent, to Rs 424.40 with a business volume of 1,995 lots.
The value of October and November contracts traded, so far, is Rs 3,075.52 crore and Rs 230.80 crore, respectively.
MCX Enrgdex dropped by 183 points or 2.96 percent at 6,004 at 14:27. The index tracks the real-time performance of MCX Crude Oil and MCX Natural Gas futures.
Natural gas futures hit a multi-year high early in the session before reversing sharply to the downside on Wednesday. The market’s volatile price action has caused it to close lower for the day.
"The early rally through the previous high at $6.425 reaffirmed the uptrend, but the sharp sell-off has now placed the market in a position to potentially change the main trend to down on a trade through $5.469,” said Kshitij Purohit, Product Manager, Currency and Commodities, CapitalVia Global Research Limited, said.
“The market’s turnaround suggests that speculative buyers were taking profits and squaring position ahead of Thursday’s US government weekly storage report and ideal weather condition” he said.
Market participants now look forward to EIA weekly inventory report scheduled for release later today.
Putin said the present market crunch is the result of a swift economic recovery around the world, which has raised the energy demand. An unexpectedly long and cold winter has depleted Europe’s gas storage.
Putin also blamed the European nations’ strategy to rely on spot market purchases rather than long-term contracts for the current crisis.
Technicals
The commodity has been trading higher than 20, 50, 100, and 200-day simple moving averages and exponential moving averages but lower than the five-day simple and exponential moving average on the daily chart. The momentum indicator Relative Strength Index (RSI) is at 54.98, which suggests a sideways movement in the price.
“Extreme choppy trades are likely inside Rs 452-404 levels and breaking any of the sides would set short-term direction,” said Geojit Financial Services.
Anand Rathi Investment Services said MCX October natural gas has support at Rs 409.70-386.70 whereas resistance is at Rs 469.90.
At 0938 GMT, the natural gas price slipped 2.7 percent to $5.52 per mmBtu in New York.
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