FxWirePro: Natural gas finds support as buyers secure pre-winter supplies

Since the end of July, the price of Natural gas has been hovering in a small range. Despite prevalent bearish sentiment, the bears have failed to break decisively below $2.75 per MMBtu area. Reports from Platts, which is global energy data provider and think tank, suggest that buyers have entered the market, both in the United States and globally to secure pre-winter supplies. Globally, Asian buyers, mainly Japanese buyers are currently most active in the market.

Japan’s Kansai energy is also quite active in the US market as it looks to secure supplies of as much as 1.2 million tons of shale gas this year and earlier next year. Beginning this year, Kansai energy will purchase 0.8 million tons of LNG from U.S. cove point export facility and will purchase another 0.4 million tons from early next year from Louisiana. The supplies will continue for next 20 years.

While it is very much likely that natural gas will continue its bearish trajectory, it now looks to find support in the short-term from heavy physical buying. In addition to that, bulls are taking note that inventory levels in the United States are 279 billion cubic feet lower than last year and just 87 billion cubic feet above 5-year average.

We, at FxWirePro, remains bullish on natural gas in the longer horizon but strongly feel that the price is likely to decline towards $2.63 per MMBtu in the very short run. It is currently trading at $2.81 per MMBtu.