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US Gas Futures Rise Above $4/MMBtu On Cool Weather View

November 9th, 2010

NEW YORK (Dow Jones) – Natural gas futures rose Monday on speculation that cooler-than-normal weather expected in some major gas-consuming markets will boost heating demand for the fuel.

Natural gas for December delivery recently traded 9.4 cents, or 2.3% higher, at $4.031 a million British thermal units on the New York Mercantile Exchange. The benchmark contract has settled higher in five of the last seven sessions.

Colder-than-normal temperatures are forecast Nov. 13-21 for much of the U.S., including some major gas-consuming regions in the Midwest and East Coast, the National Weather Service said Monday.

“Cooling is expected to arrive in waves” beginning this weekend, meteorologists with private forecaster Commodity Weather Group said.

Gas prices typically rise this time of year in anticipation of winter’s heating needs, but temperate autumn weather and bloated gas stockpiles have kept advances subdued. Some market participants have been waiting for evidence of the arrival of winter’s cold before making bets that gas prices will rise.

“Depending on how cold it does get” prices could rise as high as $4.50, said Ed Kennedy, a senior vice president of energy trading at Hencorp Futures. But futures are still under pressure, he said, and “it’s going to take something striking to get us toward the $5 level.”

Meanwhile, the number of rigs drilling for natural gas fell by 12 last week, to 955, according to oil-field services company Baker Hughes Inc. (BHI). The rig count is still up about 30% from the same week last year, as producers
continue to exploit gas-bearing rock formations known as shales. Industry observers have kept a close watch on the rig count as gas prices have fallen, looking for signs that gas producers are pulling back drilling to limit supply growth.

“While the gas rigs appear to be attempting to establish a minor downtrend, we still feel that it is premature to suggest that a top in production has been placed,” said Jim Ritterbusch, of Ritterbusch and Associates, in a client note.

U.S. gas stockpiles increased by more than average for an eighth consecutive week during the week ended Oct. 29, the Energy Information Administration reported Thursday, bringing inventories to only 16 billion cubic feet below
last year’s record highs.

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By Matt Day

Glossary Terms

Glossary Terms

Nominated Volume

The physical quantity of gas requested, typically in MMBtu/day, for a specific contract or for all contracts at a specific point.

Marketing Affiliate

A marketing company that has corporate ties to an interstate pipeline, an intrastate pipeline, or a local distribution company.

Energy Only Providers

Power marketers or other electricity vendors who provide and bill for only the energy component of the electricity consumed by the end-use customer.

Therm

A unit of heating value equivalent to 100,000 British thermal units (Btu).

Real Power

The component of electric power that performs work, typically measured in kilowatts (kW) or megawatts (MW)--sometimes referred to as Active Power.

Injection (Storage)

The process of delivering natural gas into a storage field for future delivery and use.

Price Ceiling

Statutory maximum lawful prices for various categories of natural gas, including gas destined for both the intrastate and interstate markets.

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Energy Delivery Chains

Energy Delivery Chains

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Energy & the Environment

Energy & the Environment

How we assist clients in responding to national environmental concerns.

  • Initiate and manage a "Green" energy procurement program
  • Evaluate national legislative and regulatory initiatives
  • Research state and local energy efficiency programs and incentives
  • Track energy use and related emissions estimate