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US Gas Futures Rise On Colder Weather, Inventories Weigh

November 3rd, 2010

NEW YORK (Dow Jones) – Natural gas futures rose Tuesday, with cold weather providing a boost but high inventory levels limiting gains.

Natural gas for December delivery recently traded 3.9 cents, or 1%, higher at $3.871 a million British thermal units on the New York Mercantile Exchange.

Gas futures have struggled to trade above $4/MMBtu as U.S. inventory levels are widely seen adding to the near-record 3.754 trillion cubic feet reached last week. Storage levels are unlikely to fall to normal levels until gas producers cut drilling operations. Industry analysts aren’t expecting reduced activity until well into 2011.

In the meantime, the market is likely to remain amply supplied, even if colder-than-normal winter weather drives up gas demand for home heating. While temperatures have dropped in the U.S. Northeast this week, they are expected to
remain above average for much of November.

Between rising winter demand and the inventory glut, prices are likely to remain trapped in a narrow band around their current level, analysts said.

“Within the anticipatory phase of any seasonal upswing in consumption, sustaining price downdrafts can prove difficult,” wrote Jim Ritterbusch, president of the trading advisory firm Ritterbusch and Associates, in a note to clients. “But at the same time, maintaining price advances amidst record supply levels is also arduous.”

The government’s next weekly inventory report is due out on Thursday.

Ritterbusch said the conclusion of the 2010 Atlantic hurricane season at the end of the month would also weigh on prices, as the gas-rich region of the Gulf of Mexico was largely spared from major storms. Tropical Storm Tomas remains a threat to the Caribbean, but is expected to remain well east of U.S. waters.

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By Brian Baskin

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

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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