Natural Gas on MCX settled up 4.14% at 203.60 tracking firmness from US natural gas futures which jumped above $3 per MMBTU for the first time in 16 months as warm weather boosted buying. After rallying by 5 per cent last week the front-month contract broke above $3 on Tuesday, jumping 2.5 per cent to $3.01.
Market players have highlighted how the natural gas glut in the US is arguably declining at a faster pace than oil’s following a hotter-than-average summer in much of the US. While Hedge funds last week held the largest bet on rising prices in two years, as less gas has been pumped into storage ahead of the winter months. Historic heat has caused record demand for gas-fired power at a time of declining drilling activity, persuading many that a glut leftover from last winter is easing.
Bearish traders had been expecting that heat to wane as summer nears an end, but weather forecasts show extreme heat as much as 15-degrees-Fahrenheit above normal until the end of this week, and more warm temperatures covering most of the country into next month. Total stocks continue to trend well over 3 trillion cubic feet, according to Platts, and remain above last year and the five-year average.
However, that provides little comfort for traders who recall cold winters draining supplies as in 2014, when natural gas spiked over $6. Now High pressure continues to dominate the southern US with very warm highs of 80s to mid-90s. Technically market is under fresh buying as market has witnessed gain in open interest by 32.02% to settled at 10225, now Natural Gas is getting support at 198.6 and below same could see a test of 193.6 level, and resistance is now likely to be seen at 206.3, a move above could see prices testing 209.
--Natural Gas trading range for the day is 193.6-209.
--Natural Gas soared amid forecasts for warmer than normal temperatures across most parts of the continental U.S. in the days ahead.
-Meanwhile, market players looked ahead to weekly supply data due on Thursday, which is expected to show a build of approximately 50 billion cubic feet.
--That compares with a gain of 62 billion cubic feet in the preceding week, 105 billion a year earlier and a five-year average build of 83 billion cubic feet.
Courtesy: Kedia Commodities