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Last Updated : Sep 18, 2019 11:22 AM IST | Source: Moneycontrol.com

The tale of trends in natural gas, uptrend in prices to continue

The recent attacks fuelled by the shift towards renewable resources should only see the uptrend in prices continue for some time in the future with regards to the crude oil.

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Gaurav Garg

Even with the markets giving out signals ranging from mixed to flat, the country's natural gas production has been on a rise for the second consecutive year in 2019-2020. The increase in production from fields operated by the government–owned Oil and Natural Gas Corporation was a major contributor to the rise in production.

The growth for this second straight financial year comes at

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The surge in growth comes at a time when the government is planning to increase the share of natural gas in the energy basket. The country has made a major breakthrough in the energy sector in recent years.

The government has continually looked fulfill India crude requirements through multiple sources. This has led us to Russia, a place which has proven to be very attractive for buying oil and gas.

We had already initiated the idea of buying resources from Russia as Prime Minister Narendra Modi had earlier informed that India and Russia have signed several energy deals to bolster bilateral economic ties.

The market is finally rebalancing after taking a beating for a couple of years which saw a big drop in natural gas prices. A lot of this is due to the current geopolitical conditions, changes in the legal environment and changes in the regulations.

One of the major reasons for the recent hike in prices of natural gas is that power plants have switched to using natural gas as their primary fuel. There is an expectation that this trend may continue for a while in the future too.

Cold weather conditions (low temperatures) increase the demand for heating, while hot weather (high temperatures) increases the demand for cooling. In both weather conditions we see that the natural gas demand increases for the electric power plants.

Additionally, the recent attacks on crude oil facilities in Saudi Arabia have disrupted the country's lifeline and has also affected the crude oil supply globally. The attacks on Saudi Arabia's oil refinery in Abqaiq were the one which had the highest impact. This attack on crown jewel of the kingdom shook the world and further supported the recent rise in prices.

The recent attacks fueled by the shift towards renewable resources should only see the uptrend in prices continue for some time in the future with regards to the crude oil.

(The author is Head of Research at CapitalVia Global Research Limited -Investment Advisor.)

Disclaimer: The views and investment tips expressed by investment expert on moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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First Published on Sep 18, 2019 11:22 am
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