Natural gas has just started the bullish rally in august?



Almost $1 rise for the month August amidst the fear of economic slowdown and Industrial shut down created by Covid-19. Natural Gas has never crossed $2 for the last 2.5 years. What makes the Natural gas prices really behave like a gas and how does it go further?

NYMEX futures reached a high of $2.75/mmBTU and spot prices at Henry Hub spot touched a high of $2.72 as of Today.

In India, MCX futures has witnessed a 42% increase and crossed Rs.200/mmBTU just in August month alone.

Consumption

Consumption was down or steady for the first half of 2020 but green shoots in industrial activities start pulling gas prices higher, In august, US gas consumption has reached an all-time high and marked 0.8% higher than the previous year due to increased demand from power sector & exports market.

Supply

But the supply side disrupted heavily due to hurricane Laura. EIA data shows 61% of natural gas establishments and production in the USA has affected due to Hurricane. Import from Canada also declined by 10.3%. The average total supply fell by 0.5% and Dry Natural gas production has declined by about 1%.

Storage

Pipeline and major stock data show a 20% increase from last year and a 15% increase from the last 5 years average. So it is supporting the consumption side.

What is Next?

US Gas demand continues to increase due to recovery in industrial activities, power demand created by upcoming presidential elections, and winter season.

Gas prices continued to stay higher in MCX also with immediate resistance at Rs.205, a break above 205 may push prices to Rs.230 and then to Rs.265


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