Natural Gas Showcased Sharp Downfall, Support At 245per mmbtu

MUMBAI: Natural gas traded southwards throughout the month of March and prices fell over 8 percent in the same period. Prices, which rallied over 50 percent in early February when brutally cold weather strained available supply, are now up just 1 percent for the year. Earlier, MDA Weather Services forecasted warm weather over the eastern half of the United States in the first 10 to 15 days of the month before a mild pattern resumes over the next 10 to 12-days and cold air returns to the Northeast over the next 11- to 15 days. The latest U.S. com-puter weather model showed slightly below-normal tempera-tures over the next 15 days and a little more cold than previously forecasted, accord-ing to Thomson Reuters Ana-lytics. Participants said contin-ued hefty withdrawals of natu-ral gas from already depleted storage will provide some price support to the counter. In the meantime, utilities have withdrawn a record 2.881 tril-lion cubic feet of gas from storage since the start of the heating season in November, leaving just 953 bcf in storage, and the lowest since 2003.

The number of rigs drilling for gas in North America fell by 18 to 326 in the latest report from oil services firm Baker Hughes, the lowest level in nearly 19 years. The number of rigs drilling for natural gas fell even as natural gas in stor-age is poised to end the winter season at the lowest level in more than a decade, data from oil services firm Baker Hughes Inc showed. Meanwhile, the number of rigs looking for oil climbed by 12 to 1,473 rigs, the highest in more than 20 years. Market participants watch the rig count for signs of increased production that will allow utilities to rebuild gas in storage before next winter. Nuclear plant outages, which create demand for natural gas as a substitute fuel for electric generation, were at 19,500 megawatts versus 18,700 MW in the month of March.

Natural gas showcased sharp downfall in the month of March. Prices succumbed to selling pressure throughout the month and skid over 7 percent which made it one of the worst performing commodities in the month of March. The prices have formed lower top lower bottom formation on weekly chart which is a bearish price pattern for the counter. Going forward, the momentum in prices suggests the downfall could continue in the prices where in Rs 245 per mmbtu seems to be a strong support zone for the counter. In the medium term, momentum indicator RSI (14) suggests the counter is in over sold zone and a bounce back is quite likely in the counter. Traders can initiate fresh buying positions around the levels of Rs 260 per mmbtu and set the target of Rs 290 per mmbtu with an eye on the strong support mark at Rs 245per mmbtu for upcoming weeks.