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US Gas Futures End Higher As Traders Weigh Weather Outlook

February 21st, 2011

NEW YORK (Dow Jones) – Natural-gas futures ended slightly higher Friday as market participants were reluctant to bet that prices would fall with forecasts pointing toward colder-than-normal weather at the end of the month.

Natural gas for March delivery settled 0.8 cent, or 0.2% higher, at $3.876 a million British thermal units on the New York Mercantile Exchange. On the week, the benchmark contract shed 3.4 cents, or 0.9%.

“There’s a little bit of uncertainty,” said Cameron Horwitz, a Houston-based analyst with Canaccord Genuity. “People don’t want to take it too low in case there’s another bout of arctic air.”

Colder-than-normal temperatures should cover much of the northern tier of the country beginning next week and lasting through the beginning of March, meteorologists with private forecaster WSI Corp. said. Warmer-than-normal weather is expected during the period in the Southeast.

Forecasting models haven’t settled on the intensity of the chill expected during the first week of March, WSI meteorologists said.

With the coldest of winter’s chill likely past, market participants have been closely watching forecasts to try to gauge likely demand for the heating and power-plant fuel. Futures sank by more than 9% last week as forecasts turned warmer.

Meanwhile, the number of rigs drilling for natural gas in the U.S. fell by one this week, to 905, according to oil-field services company Baker Hughes Inc. (BHI). The count has declined for three consecutive weeks, but is still at a level that analysts have said will lead to continued production growth.

Despite large withdrawals from gas inventories amid a bitterly cold winter, many market participants still see supply outpacing demand in 2011.

As of Feb. 11, U.S. inventories stood at 1.911 trillion cubic feet, 6.3% below the five-year average, and 6.9% lower than the same time last year, the Energy Information Administration said last week. That is a sharp reversal from the start of winter, when supplies bloated to near record levels almost 10% above the five-year average.

Nymex floor trading is closed Monday for the Presidents’ Day holiday.

FUTURES                   SETTLEMENT                   NET CHANGE
Nymex March                $3.876                                  +0.8c
Nymex April                   $3.906                                  +0.5c
Nymex May                   $3.976                                  +0.8c

CASH HUB                       RANGE                            PREVIOUS DAY
Henry Hub                     $3.79-$3.89                         $3.80-$3.95
Transco 65                     $3.78-$3.85                         $3.80-$3.82
Tex East M3                   $4.10-$4.40                          $4.12-$4.19
Transco Z6                     $4.95-$5.30                          $4.40-$4.55
SoCal                              $3.85-$3.87                          $3.88-$3.93
El Paso Perm                 $3.72-$3.77                          $3.72-$3.80
El Paso SJ                      $3.72-$3.76                           $3.70-$3.79
Waha                              $3.70-$3.80                           $3.74-$3.80
Katy                                $3.74-$3.80                            $3.79-$3.86

_____

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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