Natural Gas prices have declined in recent trading sessions
at MCX. There was hardly any upside at the start of the winter season. Traders aren’t
very positive about the bullish trends and many hedgers have already crated their
short positions. With warm weather patterns forecast, It is time to short
Natural Gas?
As per the technical charts and seasonal patterns, Natural
Gas prices should have soared mid-November but we didn’t see any upside.
Traders and long-terms investors were seen creating short positions based on
the change in weather patterns.
Weather patterns
Earlier in the week, weather models were supportive with
rising expectations for a cold December. Then the models shifted to milder
before trending warmer. With Warmer or milder winters predicted, it is possible
that most buyers will move out of the market.
Quite frankly! These weather patterns have been tested earlier and lead to mild
weather patterns. If this continues, we would hardly see any buyers this year
in Natural Gas.
EIA report released on Wednesday
On Wednesday, EIA report released showed smaller than
expected draw. The Energy Information Administration reported that natural gas
in storage was 3,610 Bcf as of Friday, November 22, 2019. This represents a net
decrease of 28 Bcf from the previous week. Expectations were for natural gas
stockpiles to decline by 50Bcf according to survey provider Estimize. Stocks
were 548 Bcf higher than last year at this time and 31 Bcf below the five-year
average of 3,641 Bcf. At 3,610 Bcf, total working gas is within the five-year
historical range. The trajectory has put stockpiles at the 5-year average.
Natural Gas price forecast
There is a huge Gap underneath which prices are yet to
cover. A strong resistance is seen around 2.40 level in international market. I
wouldn’t advise to short in this market yet until December end since cold
patterns are expected after December 10th.
I would suggest to hold entering this market or hold your
current buying positions since market would again see a rally and prices may
climb back to 195-200.
This would be a risky trade considering current weather
patterns and technical but charts does show an oversold zone and a spike indeed
can be seen.
Trading tip
Hold your buy positions wih a Stop loss of 170
for positional traders. Short –terms traders can sell but can be a risky trade.
Read disclaimer before investing.
0 Comments
Leave your comments below.