Natural Gas Update: Analysing the Impact of Oversupply on Natural Gas Prices

Natural Gas Update: Analysing the Impact of Oversupply on Natural Gas Prices

There has been a major decline in natural gas prices in the natural gas market, which have dropped by over 70% in the last year. The drop stems from an oversupply with US inventories currently at 41.1% above their five-year average as at March 22nd. Prices of this commodity remain tenuous because its changes are dependent upon supply and demand, weather conditions and whether other sources of energy make sense or not. According to International Energy Agency (IEA), natural gas demand will increase by an average rate of 1.5% per annum between 2019 and 2025, lower than the initial forecast of 1.8% due to Covid-19 pandemic impacts. However, Asia Pacific is set to be leading this growth with countries like India and China where there is strong state support for natural gas still expected to come out on top.

Between 2023 and 2032, it is expected that the natural gas market will grow at a rate of 2.80% due to the rising demand for natural gas in commercial and residential applications. Europe being dominant through power generation sector will drive the market during this period. The development of the market is facilitated by increased need for electricity from renewable energy sources, with China and India particularly boosting demand in Asia Pacific. Despite these positive expectations, oversupply has led to a decline in the market as US inventories according to March 22, 2024 were reported to be 43% higher than their seasonal average over five years Prices have been fluctuating because of factors such as availability of other resources, weather conditions as well as supply and demand. The future prices dropped to their lowest point ever witnessed in three and three quarters years since there was extra supply due to milder winter seasons and abundance of natural gases by year end 2024.

Weekly Update on Prediction of Natural Gas Prices:

Analysing the Impact of Oversupply on Natural Gas Prices

On Friday, natural gas prices recovered from early losses and rose modestly thanks to a short run ahead of the weekend.

Natural gas future has continued to trade in bearish trend over the course of the week, however natura; gas price has tried to rebound from support lows and managed to close at 151.50. The weekly chart shows that the price is sideways.

Similarly, the 13,21,34-EMA of 160 provides significant resistance to MCX Natural Gas futures on a daily basis. The RSI is trading between 50 and 52, according to the 4-hour and daily charts. On the daily chart, the price appears to be facing resistance between 160 and 170.

If the Natural gas prices remains below the previously determined resistance level of 160, another decrease to 138-120 is expected. The highest resistance would be observed between 160 and 170.

Happy Trading!

Commodity Samachar
Learn and Trade with Ease

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