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VIEW ON NATURAL GAS

Date : 13/06/2011

Natural gas prices rose to a 10-month high on 09/06/2011 and touched $4.9400 level, as hotter-than-normal weather expected in the US, signalled stronger demand from plants to run air conditioners.

Natural gas for July delivery trading at $4.7730 per million British thermal units on the New York Mercantile Exchange (NYMEX), highest price since July 30 and in MCX trading at ` 216.20.

Natural Gas has risen 10 percent this year (2011) and Prices have increased 3.1 percent this month as forecasts showed above-normal temperatures in the U.S.

Cooling demand in the U.S. presently at 25 percent above normal level and to meet this demand, power plants use more gas for power generation.

Power plants use about 30 percent of the nation’s (US) gas supplies, according to the Energy Department.

Natural Gas fell earlier on concern production will be more than enough to meet summer power demand.

Production:

Total U.S market gas production will average 64.61 billion cubic feet a day in 2011, up 4.5percent from 61.83 billion produced in 2010, the Energy Department said in its monthly Outlook yesterday.

US Consumption:

EIA expects total natural gas consumption will grow by 1.4percent to 67.1 billion cubic feet per day (Bcf/d) in 2011.Industrial and electric power consumption are expected to rise 3.1 percent to18.7 Bcf/d in 2011 and 0.4 percent to 20.3 Bcf/d, respectively.

Natural Gas is at the 10 month high and if Production continues to grow at a strong pace, then it will be difficult to hit $5.25 level (one year high) with rising production.

TECHNICAL OUTLOOK:

Recent rally in natural gas from $4.14 (20th may 2011) shows bullish trend and touched as high as $4.94 on 9th June 2011 but now facing stiff resistance after reaching 10 month high.

As long as trading above $4.72 level, the upside rally still valid and probably it will go further high.

On the upside, break of key resistance level $4.87 shows resumption in the up side rally towards psychological mark $5 level and after targets one year high of $5.25.

Down side, break of $4.72 support level indicates short term top has been formed and , will bring deeper pull back towards $4.37 level, ends upside rally.

The area where natural gas trading now is the top of the most recent range, and this area certainly look resistive, crossing this level very difficult.

SHORT-TERM TARGET: $4.36 TO $4.94

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