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NATURAL GAS

MCX Natural Gas futures had gradually inclined during the month of January closing at Rs.204.3/mmbtu by 3rd February. It is higher by 12.19% compared to Rs.182.1/mmbtu reported on 31st December. Bullish Sentiment has been witnessed in the market due higher usage of natural gas for heaters in the United States due to cooler weather conditions. On a yearly basis, higher usage of natural gas been witnessed in the residential and the commercial sectors. Similarly, the industrial sector has also witnessed rise in usage of natural gas while power sector has been similar over the years. Fundamentally for the current month, we are estimating MCX Natural futures to trade bullish, as weather in the United States has been reported to be cooler in the on-going winter season which is expected to further support the demand for heaters. With U.S. winter season in the middle phase, we are expecting temperatures to be more cooler during the month ahead and lower compared to previous year. As per U.S. CPC, cooler weather conditions is expected to cover the whole of United States with extremely cold temperatures to be witnessed in the northern parts of the United States. Alaska regions could also witness cooler temperatures in the coming 8-15 days which is also a positive factor for the Natural gas prices. Ona yearly basis , major incline in usage of natural gas been witnessed in the residential and the commercial sector. Conversely, the industrial and power sector has also witnessed lower usage of natural gas, but then we are forecasting recovered demand in the coming weeks. The inventories has been declining on a week on week basis, with the total supplies being reported to lower compared to the demand at 96.9 Bcf/d and 117.6 Bcf/d respectively. US Natural Gas inventories has been reported at 2955 billion cubic feet till 28th January, lower by 16.33% compared to 3532 billion cubic feet reported during 31st December 2020. In conclusion, we expect a bullish trend for the coming weeks and recommend buying in MCX Natural Gas February Futures at CMP Rs.202/mmbtu for a target price of Rs.230/mmbtu and maintaining a stop loss below Rs.188/mmbtu on a closing basis.

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