Published on 7/08/2020 3:04:57 PM | Source: Choice Broking Pvt Ltd

U.S. Inventory Build to Cap Upside Movement in Natural Gas Prices - Choice Broking

Posted in Commodities Reports| #Commodity Tips #Choice Broking

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Natural Gas

According to data from Point Logic Energy, the average total supply of natural gas has been similar compared to the previous report week, averaging at 93.5 Bcf/d (billion cubic feet per day). Dry natural gas production has been slightly lower on a weekly basis to 88.6 Bcf/d from 89.2 Bcf/d, while average net imports from Canada has reported slightly higher at 4.8 Bcf/d, during the last week.

On the other hand, demand for Natural Gas has been higher in the last week amid increased power sector demand to 85.3 Bcf/d during last week compared with the previous week's report of 89.5 Bcf/d, according to data from Point Logic Energy. Major decline has been witnessed in the power sector to 40.1 Bcf/d, compared to 44.3 Bcf/d of the preceding week. Natural gas consumption in Industrial sector has been flat at 20.7 Bcf/d on a weekly basis, while the residential/commercial usage has lower to 8.2 Bcf/d during the last week. Furthermore, Pipeline fuel use/losses has been nearly flat at averaging at 6.8 Bcf/d on a weekly basis, while exports to Mexico has been slightly higher at 5.7 Bcf/d during the last week.

Outlook:- Fundamentally for the week ahead, we are estimating MCX Natural Gas futures to trade sideways in expectancy of steady supplies, lower demand/usage and rise in inventories observed on a weekly basis. Natural gas inventories has showcased a seasonal rise to 3261 billion cubic feet, higher by 1.43% compared to previous reported inventories of 3215 billion cubic feet. Earlier this week, we saw an extreme bullish rally in Natural gas prices with some expert reports of hotter weather conditions in August and September month. But then, the US CPC has only confirmed for warmer weather conditions fr the next 6-10 days which has been mainly discounted in the prices. Further upside is likely to be limited as usage of Natural gas is still lagging behind due to covid-19 cases which will eventually bring range bound movement in the week ahead. Hence, we expect mixed trend in MCX Natural Gas Futures in the coming week.

U.S. CPC (Climate Prediction Center) survey for next 6- 10 days, showcases that warmer temperatures are estimated to cover the central, southern and norther parts of the United States. This may increase the usage of Natural Gas for power sectors in the ongoing peak summer season. Conversely, cooler temperatures are expected to be witnessed in some parts of north western regions of the United States. Normal temperatures is expected to cover the whole of Alaska regions. The above factor may not increase the usage of power sectors. Since, the weather has been reported to be near normal, the overall demand for Natural Gas is expected to decrease. In conclusion, the temperatures in United States are estimated to be 40% to 60% temperatures making a net warmer weather conditions.


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