Technically Natural Gas market is under short covering as market has witnessed drop in open interest by 25.08% to settled at 3298 while prices up 2.9 rupees.
Now Natural Gas is getting support at 192.8 and below same could see a test of 190.6 levels and resistance is now likely to be seen at 196.2, a move above could see prices testing 197.4.
Natural Gas on MCX settled up 1.51% at 195.10 trading slightly higher early Wednesday in what is believed to be a small technical adjustment to a market in the midst of steep decline. The early price action suggests some short-covering and profit-taking throughout the day as traders begin adjusting positions ahead of Thursday’s weekly storage report.
Prices continue to be pressured by rising production which is offsetting the lingering demand from the summer heat and the on-going supply deficit. Reports show that natural gas production in the Lower 48 states jumped 1.5 Bcf/d during the final three weeks in June.
This is the best explanation for the rapid sell-off despite the large storage deficit. Essentially, the natural gas market shifted from a weather-driven market to a production-driven market.
This turned the tide on the bulls, forcing them to give up hope for $4/MMBtu prices in mid-June even while forecasts still called for an extended heat dome over most of the United States into mid-July.
At current production levels and with temperatures expected to drop back to more normal levels, traders are now increasing short-side bets that the current supply deficit will be shored up before the start of winter.
--Natural Gas trading range for the day is 190.6-197.4.
--Natural gas rose as production showed signs of slipping ahead of EIA storage report.
--Prices could get a boost as Donald Trump shamed Germany for getting their natural gas from Russia.
--The weather over the next 2-weeks is expected to be mixed with warm weather in both the east and west coasts, and normal weather in the mid-west.
Courtesy: Kedia Commodities