The trend in stockpiles where both percentage above last year’s level and five-year average could be a sign of declining output as the injection season is now underway. The number of rigs operating in oil and gas regions of the US has been declining, which is not bearish for the price of natural gas. “Though natural gas prices are quite cheap and margins are low, fundamentals are turning positive and that's why traders are attracted towards in the commodity,” said Kedia.
Initially, volumes increased but now even open interest is building up in natural gas' contracts. These are also cash-settled contracts. On Tuesday, the natural gas price increased by 6.24 per cent to trade at Rs 160. Crude oil on the MCX was trading higher by 19.61 per cent at Rs 1,860 per barrel (11.05 pm).
The natural gas contract success depends on how the cost of carrying declines going forward. This because the June contract is still trading 10 per cent higher than the May expiry contract, and 10 per cent cost for carrying forward position to next month is considered too high.
Crude oil prices witnessed sharp recovery on demand growth prospects as some countries have eased lockdown. It’s net cash holding and receivable book size, are 70 per cent and five times, respectively of the market cap.