Natural gas edged up from the initial low in the very first week of the month, on back of continued hot weather that reached three digit extreme temperatures in much of the U.S nation.
However the outlook released by AccuWeather.com expects Northeast and Midwest temperatures to remain above to much-above normal for the upcoming weeks and readings were still expected to average above normal temperatures.
The counter lost all its upside momentum in the later week after EIA showed gas inventories stood at 2.611 trillion cubic feet, 218 bcf higher last year or 52 bcf higher the five-year average.
Despite a near record heat so far this summer, most traders expect prices to come under pressure once temperatures moderate, noting record high domestic gas production so far in the year would keep the market well supplied.
Market participants were remain skeptical of further upside, though more heat or hurricane could disrupts some Gulf of Mexico gas supplies.
Furthermore Baker Hughes data showed the gas-directed rig count at 885 is at a six-week high and stands well above the 800 level some say is needed to cut output and tighten supply. The EIA expects marketed natural gas production this year to climb 5.8% to a record high 65.39 billion cubic feet per day, eclipsing the previous high of 62.05 bcf daily set in 1973.
While Tropical Storm Bret and another low pressure area in the western Atlantic do not pose any threats to Gulf of Mexico gas production, traders noted activity was picking up as the peak of the hurricane season in August and September neared.
The counter has traded in a sideways range between Rs. 188/mmbtu-205/mmbtu throughout the entire month of July but failed to close on either side of the range. It is also trading below its significant 50 and 200 day EMA.
The counter is facing a strong support near Rs. 190/mmbtu levels, provided by an upwards moving trend line.
On the contrary it has witnessed a double top formation on the weekly charts near Rs. 220/mmbtu, where a close below Rs. 190/mmbtu would confirm the downtrend and the energy counter might slip further to test lower levels near Rs. 176/mmbtu and then Rs. 170/mmbtu in near future.
Courtesy: Religare Commodities
Get Trading Tips that suits your kind of investment
