Capstone Energy Services


DJ US Gas Futures Fall On Mild Weather Forecasts

February 17th, 2011

NEW YORK (Dow Jones) – Natural gas futures fell Wednesday as forecasts for mild weather across some major U.S. gas-heating markets in the coming weeks hit demand expectations for the heating fuel.

Natural gas for March delivery settled down 5.5 cents, or 1.4%, at $3.921 a million British thermal units on the New York Mercantile Exchange.

Mild weather is seen across much of the eastern half of the U.S. Feb. 22-26, meteorologists with private forecaster WSI Corp. said Wednesday.

Colder-than-normal temperatures are expected during the period across the western U.S., but the chill is seen missing some major gas-heating markets in the upper Midwest.

Forecasters expect cold to creep across the northern tier of the country during the last days of the month, with below-normal temperatures likely in parts of the Midwest and Northeast.

But without sustained calls for cold weather, the gas market will likely have difficulty sustaining rallies above $4, said Gene McGillian, an analyst with Tradition Energy.

Benchmark futures fell more than 9% last week, as forecasts for the end of the month turned warmer.

Wednesday’s declines came despite expectations for another larger-than-average weekly draw from U.S. gas inventories. Analysts and traders surveyed by Dow Jones Newswires expect the Energy Information Administration to report Thursday that more than 234 billion cubic feet of gas was withdrawn from storage last week, as high heating demand amid cold weather continues to reduce stockpiles.

If the storage estimate is correct, inventories as of Friday would have been at 1.91 trillion cubic feet, 6.3% below the five-year average. Stockpiles stood at a record high near 10% above average in November.

The weekly report is scheduled for release at 10:30 a.m. EST Thursday.

Withdrawals from storage in January came in just short of a record high for the month, FirstEnergy Capital analyst Martin King said this week in a client note. “So why is the market pulling back … convincingly under $4? The answer
remains supply.”

Some analysts see strong gas production from U.S. shale rock formations continuing to overwhelm demand and easily refilling inventories during the coming spring dip in gas use. U.S. gas demand typically reaches seasonal lows during spring and autumn, when mild temperatures leave less need for gas heating or gas-fired electricity to power air conditioning.

FUTURES                   SETTLEMENT                   NET CHANGE
Nymex March               $3.921                                   -5.5c
Nymex April                  $3.961                                   -6.9c
Nymex May                    $4.030                                  -6.7c

CASH HUB                    RANGE                    PREVIOUS DAY
Henry Hub                    $3.85-$3.97                $3.88-$3.94
Transco 65                    $3.84-$3.93                $3.90-$3.93
Tex East M3                  $4.17-$4.25                $4.20-$4.40
Transco Z6                    $4.55-$4.75                $4.65-$4.90
SoCal                             $3.91-$3.95                 $3.87-$3.90
El Paso Perm                 $3.80-$3.85                $3.77-$3.83
El Paso SJ                      $3.76-$3.81                 $3.72-$3.78
Waha                              $3.78-$3.85                 $3.78-$3.85
Katy                                $3.82-$3.89                  $3.84-$3.88


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.


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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