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US Gas Futures Rise After Touching 12-Week Lows

February 15th, 2011

NEW YORK (Dow Jones) – Natural gas futures ended higher Monday on bargain buying after prices touched their lowest levels since November.

Natural gas for March delivery settled 1.5 cents, or 0.4% higher, at $3.925 a million British thermal units on the New York Mercantile Exchange.

The benchmark contract sank by 9.3% last week, pressed by the view that winter’s peak gas demand period was coming to an end. But bargain buyers supported the market Monday, analysts said.

“Every time gas breaks below $4, people get interested,” said Matt Zeman, chief market strategist with LaSalle Futures in Chicago. “I think the consensus is that it can’t stay at these levels” for very long.

Futures earlier Monday fell as low as $3.86/MMBtu, the lowest intraday price since Nov. 18, as mild weather forecasts continued to weigh on demand expectations for the heating and power-plant fuel.

Temperatures are expected to be warmer-than-normal across the eastern two-thirds of the U.S. this week, with warmth lingering in the South and East thereafter, meteorologists with private forecaster  DA EarthSat said Monday.

Cold weather in December and January had supported the natural gas market, keeping prices in a range between about $4 and $4.60 before the recent warmer outlook sent traders cashing out.

The gas market is still pressed by depressed sentiment, analyst said, as strong production from shale rock formations is seen outpacing demand in 2011 and keeping a lid on prices.

The Energy Information Administration in its most recent outlook said U.S. production should grow by 0.8% in 2011 compared with year-earlier levels, while consumption is seen increasing by 0.3%.

But the U.S. gas market is set to end winter with a far more balanced supply-and-demand picture than was originally anticipated. Some analysts had expected that U.S. gas inventories at the end of winter’s withdrawal season would stand at a record above 1.7 trillion cubic feet. Instead, frigid weather has forced power producers to lean heavily on inventories, and the EIA said this month that it forecasts that 1.651 tcf will remain in storage at the end of March.

“We are still ending the season with less gas than people anticipated,” said Jay Levine of brokerage Enerjay LLC.

FUTURES                   SETTLEMENT                   NET CHANGE
Nymex March               $3.925                                  +1.5c
Nymex April                  $3.991                                   +1.4c
Nymex May                   $4.056                                  +0.4c

CASH HUB                    RANGE                    PREVIOUS DAY
Henry Hub                  $3.86-$3.93                  $3.91-$4.03
Transco 65                  $3.85-$3.92                  $3.92-$4.01
Tex East M3                $4.51-$5.00                  $4.33-$4.60
Transco Z6                  $5.50-$5.85                  $4.78-$5.10
SoCal                           $3.81-$3.87                   $3.84-$3.93
El Paso Perm               $3.74-$3.81                   $3.80-$3.87
El Paso SJ                     $3.66-$3.75                   $3.69-$3.78
Waha                             $3.74-$3.79                   $3.80-$3.95
Katy                               $3.81-$3.86                    $3.88-$3.98

_____

By Matt Day

Energy Facts

Energy Facts

Natural gas can be used as a raw material in a variety of products, including paint, fertilizer, plastics and medicines.

Natural gas produces fewer emissions than other fossil fuels, with less nitrogen, sulfur, carbon and fine particulates.

Texas produces the largest amount of natural gas in the USA.

The biggest consumer of coal in the US is the electric power sector.

There are 17,658 electric utility generators in the USA.
 

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