Natural gas dropped due to abundant storage, record production and low demand.

  • Kedia Advisory
  • Commodities News
Natural gas dropped due to abundant storage, record production and low demand.
Credit: © Reuters.

Natural gas experienced a notable 5.25% decline, settling at 223.9, driven by factors such as ample storage, record production, and reduced demand. The unexpected 10 Bcf build in US gas storage, contrary to the anticipated withdrawal, raised eyebrows in the market, especially given the significant deviation from last year's figures. 

Weather forecasts signalling warmer temperatures until mid-December added to the bearish sentiment. November witnessed a substantial 26% drop in natural gas , the largest monthly decline since January, following a surge in October. In Europe, gas storage draws were observed, with the overall tracker at 94.39%. However, some countries like Belgium saw a sharp ten-percentage-point decline to 87.44% since Friday. On the global stage, the US solidified its position as a leading LNG supplier, with record flows to export plants in November. Higher global prices, driven by supply disruptions and Ukraine-related sanctions, fueled increased demand for US LNG exports. 

From a technical perspective, the market saw fresh selling, with a 7.1% rise in open interest to 43084 and a price decrease of -12.4 rupees. Support is identified at 220, and a breach could lead to a test of 216, while resistance is at 230.5, with a potential upward move to 237.

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