Natural gas prices to trend lower on rising production, increasing stockpiles

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The energy complex closed the week on a mixed note with Nymex crude jumping another percent while Nymex natural gas ending with a two percent loss.




Precious metal complex ended negative gains over the last week as the inverted yields in US treasuries started to narrow and dollar started strengthening.

Base metal prices ended with small gains with copper and aluminum closing the week with a percent gains each, while lead, zinc, and nickel ended flat. Base metals showed limited gains due to global recession worries, but US-China trade talks renewed optimism towards the end of the week.

The energy complex closed the week on a mixed note with Nymex crude jumping another percent while Nymex natural gas ending with a two percent loss. Crude oil prices continued to trend higher despite worries over global growth and higher inventories. Natural gas prices continue to trend lower on warmer weather and lower-than-expected inventory withdrawals this week.

Natural gas prices are trading lower on bearish weather outlook, increasing stockpiles. Natural gas prices are expected to face downside pressure on strong growth in natural gas production in 2019 as EIA forecasts the dry gas production to average at 90.7 BCF in 2019, up by 7.4 BCF as compared to last year.

Higher production will also give an early start to the storage injection this period. Currently, inventory levels are 15 percent below their five-year average.

In the short term, we remain negative on natural gas. Prices are likely to face downside pressure on a forecast of warmer temperatures and on waning seasonal demand, thereby increasing stockpiles.

MCX Natural Gas prices will trade lower towards Rs 175-170 levels from the current price of Rs 190 per MMBtu.

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