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Natural Gas: Positive Trend To Continue

By Abhishek BansalCommoditiesJul 01, 2021 05:23AM ET
Natural Gas: Positive Trend To Continue
By Abhishek Bansal   |  Jul 01, 2021 05:23AM ET
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Natural gas prices are currently trading near $3.739 with support from a positive domestic demand outlook, increasing exports and increasing electricity output to meet air cooling demand in the US.

The Commodity Weather Group said that heat wave will expand to Midwest and Northeast next week. Additionally Weather data agency Maxar said on Monday that above-normal temperatures are expected in the Northwest from July 3-7, and above-normal temperatures are expected across the northern half of the US from July 8-12.

Natural gas prices are likely to find support from increasing domestic and export demand along with increasing electricity output in the US. As per Bloomberg data, US natural gas demand on Wednesday was 71.2 bcf, up +3.8% y/y. Gas flows to U.S LNG export terminals on Wednesday were 11.2 bcf, up +7.9%. US electricity output in the week ended June 26 rose +2.1% y/y to 85,364 GWh (gigawatt hours).

However, increasing in domestic gas production is likely to keep a lid on prices. As per Bloomberg data, US gas production on Wednesday was up +3.9% y/y at 91.241 bcf/d.

Meanwhile, Fitch Solutions on Monday increased its 2021 US natural gas price forecast to $3.2/mmbtu from a prior forecast of $2.75. As per Fitch Solution natural gas prices are rallying up due to a sharp decline in storage levels, high power demand, and strong LNG exports.

Natural gas prices are likely to get fresh direction from the weekly inventory report which is scheduled to release later today. The market expects inventories to climb by 68 bcf. US natural gas inventories in the week ended June 18 rose +55 bcf to 2,482 bcf, against expectations of +64 bcf. Current natural gas inventories are down -17.6% y/y and -5.8% below their 5-year average.

According to the CFTC Commitments of Traders report for the week ended June 22 net short for natural gas futures dropped by 2,598 contracts to 105,098 for the week. Speculative long position increased by 4,371 contracts, while shorts added 1,773 contracts.

Baker Hughes reported on Friday that the US natural gas drilling rigs in the week ended June 25 rose by +1 rig to 98 rigs. US gas rigs are well above the record low of 68 rigs posted in July 2020.

Natural gas prices are likely to trade firm while above the key support level of $3.689-$3.564 while immediate resistance is seen near $3.899-$3.984

Natural Gas: Positive Trend To Continue

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Natural Gas: Positive Trend To Continue

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Disclaimer: Mr. Abhishek Bansal is a new-age, first-generation entrepreneur, and the Founder Chairman of Abans Group, a quintessential diversified business group, providing expertise in Broking Services, Non-Banking Financial Dealings, Financial Services, Agri-Commodity Services, Warehousing, Realty & Infrastructure, Gold Dore Refinery & Manufacturing, and Trading in Metal Products, Pharmaceuticals, Software Development & Wealth Management.
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