Natural gas futures drop after touching highest level since December 2018, all eyes on EIA inventory report

The momentum indicator RSI is at 66.71, which suggests upward movement in the price.

Natural gas futures fell on August 5 after logging sharp gain in the previous session as the price hit a high of $4.205/mmBt-u, the highest since December 2018. The gas price jumped 3.27 percent yesterday on the NYMEX.

The energy commodity extended decline in the afternoon session after a flat-to gap-up start, tracking subdued global cues.

On the MCX, natural gas delivery for August slumped Rs 3, or 0.97 percent, to Rs 306.80 per mmBtu at 14:34 hours with a business turnover of 17,296 lots.

Gas delivery for September slipped Rs 2.90, or 0.93 percent, to Rs 307.90 per mmBtu with a business volume of 3,632 lots.

The value of August and September's contracts traded so far is Rs 1,020.99 crore and Rs 81.71 crore, respectively.

MCX iCOMDEX Natural Gas Index decreased 37.88 points or 1 percent to 3,748.27.

Sriram Iyer, Senior Research Analyst at Reliance Securities said, “International natural gas futures have turned weaker this Thursday afternoon in Asian trade ahead of inventory report data tonight. Technically, NYMEX Natural Gas could trade in a range of $4.000-$4.300 levels.”

On the domestic front, MCX Natural Gas August holds strong support near Rs 307-Rs 304 levels. Resistance is at Rs 311-Rs 315 levels”, Iyer added.

The weather is expected to remain much warmer than normal, followed by above-normal temperatures for the next 8-14 days in the United States and buoyed cooling demand.

Market players await Energy Information Administration (EIA) weekly inventory report due later in the day. Expectations are for a 21 Bcf build, according to survey provider Estimate.

The gas prices were supported by robust US LNG exports amid higher global prices.

Natural gas has tested fresh highs reflecting strong buying momentum; however, it may continue only if the inventory report meets or better market expectations. Apart from inventory report, the focus will also be on US weather and trend in energy prices, 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 RSI is at 66.71, which suggests upward movement in the price.

At 09:19 GMT, the natural gas price was down 0.67 percent at $4.13 per mmBtu in New York.

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