• FxWirePro: buy natural gas at dips; target $4.3 per mmbtu

    Source: FxWire Pro - Commentary / 12 Jul 2016 04:06:57   Eastern Standard Time

    For past few years, there has been a sharp shift in the global energy market. De-carbonization, a trend which has been prevalent for years but accelerated only in the past few and will continue to do so as the developed world, began a fresh energy transformation post environmental summit and agreement known as the COP 21.

    The use of natural gas as an alternate source both coal and oil are likely to go up, hence we suspect the increase in demand likely to push up prices, especially since the NYMEX traded natural gas formed a key base around $1.9-2 area. The biggest risk to the bullish outlook is the economic weakness in China, leading to a hard landing which in turn may lead to a risk aversion.

    Without that happening, we expect natural gas to be bullish.

    Trade idea –

    We suspect that natural gas is going to form a bottom around $2.5-2.6 area and from there it is likely to test $3.1 area first and then move towards $4.3 per MMBtu. Stop loss for the trade is better kept at $1.9 per MMBtu, however, we don’t see the price moving below $2.3 per MMBtu.