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Natural Gas
Natural Gas – An Integrated Analysis
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An Integrated Analysis
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CONTENTS
Introduction
Uses of Natural Gas
Natural Gas Demand
Factors Affecting Short Term Demand
Factors Affecting Long Term Demand
Natural Gas Supply
Meeting Natural Gas Demand
Factors Affecting Supply of Natural Gas
U.S. Natural Gas price forecast
Technical View
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Introduction
Natural Gas is one of the principle sources of energy for many of our day-to-day needs
and activities. For hundreds of years, natural gas has been known as a very useful
substance. The Chinese discovered a very long time ago that the energy in natural gas
could be harnessed, and used to heat water.
In the early days of the natural gas industry, the gas was mainly used to light
streetlamps, and the occasional house. However, with much improved distribution
channels and technological advancements, natural gas is being used in ways never
thought possible.
There are so many different applications for this fossil fuel that it is hard to provide an
exhaustive list of everything it is used for. And no doubt, new uses are being discovered
all the time.
Uses of Natural Gas
Power Generation: Natural gas is a major source of electricity generation through
the use of gas turbines and steam turbines. Most grid peaking power plants and some
off grid engine generators use natural gas. Natural gas burns more cleanly than
other Hydrocarbon fuels, such as oil and coal, and produces less carbon dioxide per
unit of energy released.
Domestic use: Natural gas dispensed from a simple stovetop can generate heat in
excess of 2000°F (1093°C) making it powerful domestic cooking and heating fuel. In
much of the developed world it is supplied to homes via pipes where it is used for many
purposes. In the rural areas it is also used as CNG & LPG.
Transportation: CNG is
gasoline (petrol) and diesel. The energy efficiency is generally equal to that of gasoline
engines, but lower compared with modern d
Fertilizers: Natural gas is a major feedstock for the production of ammonia, via the
Haber process, for use in fertilizer production.
Hydrogen: Natural gas can be used to produce
being the hydrogen reformer.
for the chemical industry, a hydrogenating agent, an important commodity for oil
refineries, and a fuel source in
Other: Natural gas is also used in the manufacture of fabrics, gl
paint, and other products.
Natural gas uses by sector
a cleaner alternative to other automobile fuels such as
gasoline (petrol) and diesel. The energy efficiency is generally equal to that of gasoline
engines, but lower compared with modern diesel engines.
Natural gas is a major feedstock for the production of ammonia, via the
Haber process, for use in fertilizer production.
Natural gas can be used to produce hydrogen, with one common method
hydrogen reformer. Hydrogen has many applications: it is a primary feedstock
for the chemical industry, a hydrogenating agent, an important commodity for oil
refineries, and a fuel source in hydrogen vehicles.
Natural gas is also used in the manufacture of fabrics, glass, steel, plastics,
Industrial
32%
Electric generation
24%
Residential
22%
Commercial
14%
Other
8%
Natural gas uses by sector
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automobile fuels such as
gasoline (petrol) and diesel. The energy efficiency is generally equal to that of gasoline
Natural gas is a major feedstock for the production of ammonia, via the
hydrogen, with one common method
Hydrogen has many applications: it is a primary feedstock
for the chemical industry, a hydrogenating agent, an important commodity for oil
ass, steel, plastics,
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Natural Gas Demand
Natural gas is believed by many to be the most important energy source for the future.
The abundance of natural gas, worldwide as well as domestically, coupled with its
environmental soundness and multiple applications across all sectors, means that
natural gas will continue to play an increasingly important role in meeting demand for
energy. There are many reasons for the long term expected increase in natural gas
demand. As can be seen, demand for all types of energy, save nuclear and hydro
power, is expected to increase over the next 20 years. This general upswing can be
attributed to the expected general growth of the U.S. economy and population in the
future.
Factors Affecting Short Term Demand
Demand for natural gas has traditionally been highly cyclical. It depends highly on the
time of year, and changes from season to season:-
Weather: Natural gas demand typically peaks during the coldest months and tapers
off during the warmest months, with a slight increase during the summer to meet the
demands of electric generators.
Fuel Switching: Supply and demand in the marketplace determines the short term
price for natural gas. However, this can work in reverse as well. The price of natural gas
can, for certain consumers, affect its demand. For instance, during a period of extremely
high natural gas prices, many electric generators may switch from using natural gas to
using cheaper coal, thus decreasing the demand for natural gas.
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U.S. Economy: The state of the U.S. economy in general can have a considerable
effect on the demand for natural gas in the short term, particularly for industrial
consumers. When the economy is expanding, output from industrial sectors is generally
increasing at a similar rate. When the economy is in recession, output from industrial
sectors drops. These fluctuations in industrial output accompanying economic upswings
and downturns affects the amount of natural gas needed by these industrial users.
Factors Affecting Long Term Demand
The long term demand factors reflect the basic trends for natural gas use into the future.
In order to analyze those factors that affect the long term demand for natural gas, it is
most beneficial to examine natural gas demand by sector.
Residential and Commercial Demand:
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Industrial Demand:
Electric Generation Demand:
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Natural Gas Supply
Maintaining an adequate supply of this critical resource is essential to preserving and
improving our quality of life. Inadequate supply at any one time leads to price increases,
which signal to production companies the need to increase the supply of natural gas to
the market. Supplying natural gas in order to meet this demand, however, is dependent
on a number of factors.
These factors may be broken down into two segments: general barriers to increasing
supply, and those factors that affect the short term supply scenario.
Short Term Supply Barriers
In a perfect world, price signals would be recognized and acted upon immediately, and
there would be little lag time between increased demand for natural gas, and an
increase in supplies reaching the market. However, in reality, this lag time does exist.
There are several factors that affect this lag time and the short term availability of
natural gas supply. They include:
Availability of Skilled Workers
Availability of Equipment
Permitting and Well Development
Weather and Delivery Disruptions
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General Barriers to Increasing Supply
In addition to the short-term impediments to increasing natural gas supply, there exist
other more general barriers to the increased supply of natural gas. These include:
Onshore and Offshore Access: An estimated 59 percent of the U.S. undiscovered
natural gas resources is located on federal lands and offshore waters, however much of
these resources are off-limits to exploration and production. Access to coastal
resources remains an ongoing issue for natural gas: in the wake of the tragic Deepwater
Horizon accident and oil spill in spring 2010, the administration instituted a six- month
moratorium on deepwater drilling leases in the Gulf of Mexico.
Pipeline Infrastructure: The ability to transport natural gas from producing regions
to consumption regions also affects the availability of supplies to the marketplace. The
interstate and intrastate pipeline infrastructure can only transport so much natural gas at
any one time, and in essence provides a 'ceiling' for the amount of natural gas that can
reach the market.
The Financial Environment: Exploring for and producing natural gas is a very
capital intensive endeavor. In fact, the National Petroleum Council estimated in 2007
that production companies will have to invest $4.3 trillion in capital between 2005 and
2030 in order to keep pace with demand growth. While efficient and transparent
financial markets in the U.S. do offer options for raising capital effectively, the rate at
which production companies may do so can serve as a limiting factor in the increasing
availability of supplies reaching the market.
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TECHNICAL VIEW
Natural Gas CMP - $4.531 Target Price –$6.090
Moving averages
Moving Averages 20 Day 50 Day 100 Day 200 Day
Daily $4.293 $4..403 $4.356 $4.283
Weekly $4.312 $4.163 $4.387 $5.784
Fibonacci retracement levels
SCRIPT 0.0% 23.6% 38.2% 50.0% 61.8% 100.0% 138.2 161.2
Natural gas $6.086 $5.216 $4.650 $4.215 $3.780 $2.323 $0.8936 $0.0104
Expansion levels
SCRIPT 23.6% 38.2% 50% 61.8% 76.4% 100% 138.2% 161.8%
Natural Gas $4.542 $4.890 $5.542 $5.977 $6.543 $7.435 $8.870 $9.740
Weekly Pivot
SCRIPT R4 R3 R2 R1 P S1 S2 S3 S4
Natural Gas $5.526 $5.155 $4.784 $4.657 $4.413 $4.286 $4.042 $3.671 $3.300
Monthly Pivot
SCRIPT R4 R3 R2 R1 P S1 S2 S3 S4
Natural Gas $5.819 $5.338 $4.857 $4.694 $4.376 $4.213 $3.895 $3.414 $2.933
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TECHNICAL SUMMARY
Support/Resistance Levels Price Key Turning Points
8.197 Price Crosses 18-40 Day Moving Average
14 Day RSI at 80% 5.496 5.031 Price Crosses 9-40 Day Moving
Average 52 Week High 4.925
13 Week High 4.915 14 Day RSI at 70% 4.898 4.747 3-10 Day MACD Oscillator Stalls 4.586 38.2% Retracement from 13 Week
High Current Price 4.585 Current Price
4.506 14-3 Day Raw Stochastic at 80% 4.489 14 Day %k Stochastic Stalls 4.485 50% Retracement from 13 Week
High/Low 4.484 Price Crosses 40 Day Moving
Average 4.467 14-3 Day Raw Stochastic at 70% 4.434 38.2% Retracement from 4 Week
High 4.431 Price Crosses 9 Day Moving
Average 4.421 14 Day RSI at 50% 4.397 14 Day %d Stochastic Stalls 4.387 50% Retracement from 4 Week
High/Low 14-3 Day Raw Stochastic at 50%
4.384 38.2% Retracement from 13 Week Low
4.364 Price Crosses 18 Day Moving Average
4.341 38.2% Retracement from 4 Week Low
4.320 Price Crosses 40 Day Moving Average Stalls
4.309 14-3 Day Raw Stochastic at 30% 4.286 Price Crosses 9 Day Moving
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Average Stalls 4.269 14-3 Day Raw Stochastic at 20% 4.255 38.2% Retracement from 52 Week
High 4.218 3-10-16 Day MACD Moving
Average Stalls 4 Week Low 4.190 Price Crosses 18 Day Moving
Average Stalls 13 Week Low 4.055 4.048 50% Retracement from 52 Week
High/Low 3.840 38.2% Retracement from 52 Week
Low 14 Day RSI at 30% 3.724 3.290 Price Crosses 9-18 Day Moving
Average 52 Week Low 3.170 14 Day RSI at 20% 2.852
Daily Quotes Period Moving Average Price Change Percent Change Avg Volume 5-Day 4.498 +0.217 +4.97% -
20-Day 4.363 +0.235 +5.40% - 50-Day 4.414 +0.335 +7.88% -
100-Day 4.270 +0.755 +19.71% - 200-Day 4.133 +0.920 +25.10% -
Year to Date 4.283 +0.360 +8.52% -
Period Raw Stochastic Stochastic %K Stochastic %D ATR
9-Day 100.00% 93.90% 84.33% 0.066 14-Day 100.00% 91.90% 78.74% 0.068 20-Day 100.00% 84.21% 64.46% 0.068
Period RSI Percent R Historic Vol. MACD Oscillator
9-Day 65.09% 0.00% 32.98% +0.151
14-Day 59.33% 0.00% 29.71% +0.173
20-Day 56.67% 0.00% 29.44% +0.192
50-Day 53.76% 38.37% 32.09% +0.141
100-Day 52.21% 27.97% 30.69% +0.285
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Weekly Quotes Period Moving Average Price Change Percent Change Average Volume
6-Week 4.372 -0.330 -6.71% - 6-Month 4.234 -0.145 -3.07% - 1-Year 4.107 -0.110 -2.34% - 3-Year 4.545 -4.735 -50.80% - 5-Year 5.817 -2.620 -36.36% -
Period Raw Stochastic Stochastic %K Stochastic %D Average True Range
9-Week 54.48% 45.40% 45.72% 0.232 14-Week 61.63% 49.75% 49.62% 0.241 20-Week 71.55% 61.27% 58.97% 0.252
Period Relative Strength Percent R Historic Volatility MACD Oscillator
9-Week 57.31% 45.52% 42.35% -0.043 14-Week 55.61% 38.37% 38.16% +0.036 20-Week 54.21% 28.45% 35.91% +0.135 50-Week 50.57% 18.91% 41.57% +0.350
100-Week 49.39% 41.56% 82.35% +0.209
Monthly Quotes
Period Moving Average Price Change %Change Avg Volume
6-Month 4.373 +0.150 +3.38% -
2-Year 4.236 +1.215 +36.05% -
5-Year 5.799 -4.665 -50.43% -
10-Year 5.823 +1.275 +38.52% -
20-Year 4.151 +3.245 +242.16% -
Period Raw Stochastic Stochastic %K Stochastic %D ATR
9-Month 79.90% 72.10% 63.96% 0.718
14-Month 70.57% 60.73% 53.47% 0.850
20-Month 42.75% 47.27% 48.72% 0.978
Period Relative Strength Percent R Historic Volatility MACD Oscillator
9-Month 53.35% 20.10% 97.09% +0.162
14-Month 49.87% 29.43% 37.71% +0.260
20-Month 48.47% 57.25% 44.01% +0.136
50-Month 48.92% 76.53% 50.29% -1.101
100-Month 49.84% 80.24% 62.25% -1.733
Weekly Chart Analysis
Above is the weekly chart of Natural gas. We have applied retracement of its fall from
high of $13.752 (July 2008) to its low of $2.334 (August 2009). Natural gas over the
past one and a half years has retraced back to its 23.6% retracement
been in uptrend since then making higher top and higher bottoms. The overall weekly
chart of natural gas is making a symmetrical triangle pattern and we expect an
aggressive break out in the near term. Also, considering its correlation with U
oil, Crude has retraced more than 61.8% of its fall back in 2008 and is in uptrend
making higher tops and higher bottoms.
averagely bullish and in overall uptrend
to the level of 38.2%($6.670) which is way above our conservative target of $6.090
hart Analysis
Above is the weekly chart of Natural gas. We have applied retracement of its fall from
high of $13.752 (July 2008) to its low of $2.334 (August 2009). Natural gas over the
past one and a half years has retraced back to its 23.6% retracement
been in uptrend since then making higher top and higher bottoms. The overall weekly
chart of natural gas is making a symmetrical triangle pattern and we expect an
aggressive break out in the near term. Also, considering its correlation with U
oil, Crude has retraced more than 61.8% of its fall back in 2008 and is in uptrend
making higher tops and higher bottoms. If we look at 14 Days RSI, it is at 53.86 which is
in overall uptrend as well and supporting our expect
to the level of 38.2%($6.670) which is way above our conservative target of $6.090
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Above is the weekly chart of Natural gas. We have applied retracement of its fall from
high of $13.752 (July 2008) to its low of $2.334 (August 2009). Natural gas over the
past one and a half years has retraced back to its 23.6% retracement level and has
been in uptrend since then making higher top and higher bottoms. The overall weekly
chart of natural gas is making a symmetrical triangle pattern and we expect an
aggressive break out in the near term. Also, considering its correlation with U.S crude
oil, Crude has retraced more than 61.8% of its fall back in 2008 and is in uptrend
it is at 53.86 which is
as well and supporting our expected break out
to the level of 38.2%($6.670) which is way above our conservative target of $6.090.
Monthly Chart - Fibonacci retracement
In the monthly chart of Natural gas above,
uptrend starting from September 2
level of 23.6 % ($5.216) and then the level of 61.8% ($3.780) acted as
the past one and a half years. N
has taken crucial support of retracement level 50
Given its overall trend, it has been in uptrend making higher tops and higher bottoms and is in a
symmetrical trading range and we expect an aggressive break out from here that will unfold
prices to 23.6% ($5.220) and if breaks that
Fibonacci retracement
Natural gas above, we have applied Fibonacci
uptrend starting from September 2009 to January 2010. It has taken support of
level of 23.6 % ($5.216) and then the level of 61.8% ($3.780) acted as a crucial support
. Now, it is trading in the range of 38.2 & 50% and this week
cial support of retracement level 50%.
been in uptrend making higher tops and higher bottoms and is in a
range and we expect an aggressive break out from here that will unfold
nd if breaks that resistance then can further rally to $6.
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retracement of
009 to January 2010. It has taken support of retracement
crucial support for
it is trading in the range of 38.2 & 50% and this week
been in uptrend making higher tops and higher bottoms and is in a
range and we expect an aggressive break out from here that will unfold
can further rally to $6.090.
Fibonacci Expansion
In the monthly chart of Natural gas above,
uptrend starting from September 2009 to January 2010
Natural gas is moving in the range of 4.890
can have a potential upside break
pattern, it may now unfold to 61.8% level
Natural gas above, we have applied Fibonacci
uptrend starting from September 2009 to January 2010 to project our next levels
ral gas is moving in the range of 4.890-3.671(0 - 38.2%) from 2010 and now
have a potential upside break-out, given its trend and symmetrical triangle
61.8% level, near our target price $6.090.
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Fibonacci expansion of
to project our next levels.
) from 2010 and now
, given its trend and symmetrical triangle
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