Capstone Energy Services


US Gas Futures Turn Lower As Weather Rally Fades

May 25th, 2011

NEW YORK (Dow Jones) – Natural-gas futures prices turned weaker early Tuesday, despite forecasts for above-normal temperatures in the central and eastern U.S.

Prices jumped early to a two-week high of $4.397 a million British thermal units, rallying for a third day on the weather outlook. But market players sold into the gains on the realization of ample supplies.

“There’s plenty of gas out there,” said Ed Kennedy, senior vice president at INTL Hencorp Futures. He said when prices failed to make a reach $4.50 a MMBtu, sellers took over.

“The market’s not bullish or bearish, it’s adequately priced,” he said.

June-delivery gas on the New York Mercantile Exchange was down 3.2 cents at $4.314 a MMBtu.

The National Weather Service said Monday afternoon that above-normal temperatures are expected across much of the nation from Texas to through the East Coast over the next six to 14 days to June 6. But traders said the market
is well supplied to meet the short-term demand.

Peter Beutel, president of Cameron Hanover energy advisory firm, sees a rebound in prices, “but we do not expect it to be anything close to a vertical move. Instead, we expect prices to start and stop, with buying interspersed with selling. The weather is unlikely to help – or hurt – the process, but traders will certainly keep it in mind.”

Traders also will be keeping an eye on economic indicators this week, for signs of stronger industrial demand. Data on U.S. durable goods order for April are due out Wednesday and are expected to show a 2.1% drop, after jumping a revised 4.1% in March, according to a Dow Jones Newswires’ survey of economists. U.S. first-quarter gross domestic product data, due Thursday, are expected show real GDP growth at a 2.2% annual rate, up from the earlier indication a month ago of 1.8% growth.

Meanwhile, natural gas for next-day delivery at the benchmark Henry Hub in Louisiana recently traded at $4.325/MMBtu, according to InterContinental Exchange, up 5 cents from Monday’s average. Natural gas for Tuesday delivery at Transcontinental Zone 6 in New York traded at $4.72/MMBtu, up 1 cent from Monday.


By David Bird

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