NATURAL GAS OVER-SUPPLY KEEP JULY FUTURES UNDER PRESSURE
By Ibrahim Patel
Natural gas prices kept fluctuating due to recent steady increase in the estimates of the US stock and warm weather. The forecast for warm to very warm temperatures have been and will continue to be pushing up demand for natural gas as demand for electricity to run air-conditioning rises. During coming days, at least two states may feel under extreme heat with the temperature going a high as 90 degree Fahrenheit. Prices are likely to remain low as demand for heating and cooling would be less in rest of the states. With profit booking by the traders on Thursday and Friday, previous three days rally was washed out with 0.35 cent decline. On Friday, front month July natural gas futures were quoted at $ 2.74 per Million British Thermal Unit (MBTU) on the New York Mercantile Exchange (NYMEX).
In its report for the week ended on 5th June, the US Energy Information Administration (EIA) stated on Thursday that 111 billion cubic feet (BCF) gas was injected into the underground storage tanks. This increase in storage was almost as per the market expectation of 112 BCF. In the previous week it was 132 BCF. Thus, the current demand –supply scenario of the market was somewhat balanced. The storage increase was 109 BCF during the corresponding period of the last year. However, five years average was the corresponding period is 89 BCF. Thus, the total natural gas storage stock of the US was 2.334 trillion cubic feet during last week.
The analyst of natgas.com says that while considering the short and medium term weather picture, the weather event of the last week of June would provide major guidance to the market sentiment. He believes that the short term demand may provide support to the market. A broker associated with FCSton LLC said that rapid pullback started in futures since Thursday after three days rally would inspire bears for profit booking which may enable prices to recover from the bottom. However, it is difficult to say up to what level prices may increase. He says that given the warm weather forecast for the more natural gas consuming US areas, the demand for gas may be more for the air-conditioning power generation.
According to the other analysts, given the over-supply of the gas, market fundamentals are bearish at present. Currently, there is rapid inflow and outgo of money in the market. Speculators are taking advantage of various cues and moving quickly. After a couple of weeks of storage report estimate misfires from natural gas analysts and traders, they finally got one right Thursday morning as news of a 111 BCF injection into inventories for the week ending June 5 was nearly spot on with the industry consensus ahead of the report.
The market trend was already confirmed with the mammoth 132 BCF storage injection figures of the week prior to 5th June. These figures washed out hope for increase in purchase by the utilities. Analysts opine that in spite of the forecast for the warm weather in the US, the over-supply of natural gas would force front month July futures to remain low or under pressure till going into the delivery period.
[Courtesy - www.commoditydna.com]
Ibrahim Patel is well-experienced commodity & currency expert. He has writing experience in the field since 35 years. He is working in Sandesh Gujarati newspaper and also editor of www.commoditydna.com. He had vast experience in analysis of trends in comodity markets in Vyapar, a commercial newspaper from Mumbai.[/vc_column_text][/vc_column][/vc_row]
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