Citigroup Issues A Neutral/Sell Rating For Natural Gas
Citigroup has issued a note about remaining neutral on natural gas and selling it on rallies. As per the report, the best option is to stay neutral on natural gas.
And in case of any rallies, the focus shouldn't be buying it at all. Instead, it would be better to offload the positions at rallies.
Overall, the sentiment surrounding natural gas is not bullish at all, according to the Citigroup report. Considering how natural gas plays a key role in heating houses, it is good news for the average USA consumer.
Natural Gas Futures: Down By 50%
If we look at the natural gas futures, it is already down by 50%, and the reports suggest even more downside. The major reason for this is due to the current weather condition, which doesn't require any heating or cooling at all.
This situation is leading to less demand and overproduction of natural gas in the country! Furthermore, the inventory data reveals that the USA's underground caverns are around 2.063 tcf.
When compared with last year, the current level is 33% higher, which is a lot! In fact, the current value of 1.556 tcf is 20% higher than the 5-year average value.
The gas contract for the month of June is down by 3.2%, which equals 6.9 cents. As a result, the contract was priced at $2.101 mmBtu, ahead of the upcoming inventory data.
As per the Citigroup note, the narrative for a bullish hike in natural gas is based on the usage of gas for electricity generation. But Citigroup believes that other factors of supply & demand will offset it.
In addition, the chances of a price rebound during the summer season will be offset by the robust production of natural gas. The end result of all of this is more downside for natural gas whenever it attempts to go higher.
Based on this data, Citigroup has urged investors to pay close attention to the natural gas market as there's very little chance of any long-term upside.