Energy Sector and Oil Futures Update for Commodity Traders: Nirmal Bang
U. S. crude futures fell more than 3 percent on Wednesday, battered by government data showing a large, surprise increase in crude inventories and as the dollar rebounded strongly.
New York Mercantile Exchange natural gas futures ended sharply lower on Wednesday, as there is expectation of a buildup in inventory and fairly mild U. S. weather forecasts pressured the prices.
The U. S. Energy Information Administration reported last natural gas production in March fell slightly from February levels but was still more than 2 percent above the same time last year.
AccuWeather. com expects temperatures in the Northeast and Midwest, key gas consuming regions, to mostly average below normal for the next week, with highs ranging from the mid-60s to mid-70s Fahrenheit not likely to generate much demand.
The National Weather Service eight- to 14- day outlook on Wednesday called for normal or below normal temperatures for most of the nation, with above seasonal readings expected only for Gulf Coast states from Texas to Florida.
Last week's EIA storage report showed that total domestic gas inventories stood at a record high 2.213 trillion cubic feet, 22 percent above the five-year average. A Reuters poll on Wednesday showed inventories were expected to rise 114 bcf when the weekly EIA storage report is released on Thursday at about 10:30 a. m.
We expect a further downside in energy complex as built up in inventory raised the demand concerns. We recommend selling Crude and Natural Gas at every rise during the day.
Crude prices showed the expected correction yesterday. The Filled long red candle indicates trend reversal in Crude. However, prices took support at 3072 (38.25 Retracement). Prices may resist the 3130-50 level on the upside (23.6% retracement from top). Thus, one can sell at rise in Crude with Sl of 3130-50 (23.6% levels), targeting 3050 and 3025 on the downside.
Natural gas prices also breached the trend line on the down-side. Thus, the bias remains on the downside for the day. The RSI has crossed the MA on the downside. However, the ADX is still indicating uptrend. Thus, one can buy Natural gas at lower levels around 170-172 (the earlier support area) during the day.
