Capstone Energy Services


US Gas Warm-Weather Forecasts Lift Natural Gas Futures

May 23rd, 2011

NEW YORK (Dow Jones) – Natural gas futures climbed Monday after weather forecasts calling for warmer-than-usual temperatures across much of the U.S. point to rising demand.

Natural gas for June delivery recently traded up 8.8 cents, or 2.1%, to $4.318 per million British thermal units on the New York Mercantile Exchange.

The contract advanced for the second straight session as market participants anticipate higher natural gas use. High temperatures in the Midwest will persist for another one to two days, according to the Commodity Weather Group. “Widespread heat” should follow over the next 11 to 15 days in the Midwest, East and South, the forecaster said.

“Traders are starting to position themselves into natural gas for the upcoming summer months,” said Rich Ilczyszyn, market strategist at brokerage Lind-Waldock in New York.

Natural gas futures were among the only gainers in commodities Monday, as a strong dollar sent other markets sliding. The contract’s move higher suggests robust fundamental demand for the commodity, Ilczyszyn said.

“Natural gas is telling me that there’s an interest in it outside the currency play,” he said.

Natural gas futures have traded in a tight range for much of May, holding between $4 and $4.35 a million British thermal units since a commodities-wide sell-off on May 5. Analysts say buyers are cautiously re-entering the market,
but prices may not climb out of their trough without additional signs of weather-driven demand as the summer progresses.

Jim Ritterbusch, head of the trading advisory firm Ritterbusch & Associates, said prices could climb to as high as $4.60 per million British Thermal Units “should hot temperatures that are showing up within the 11-15 day forecasts
extend well into next month.”

The contract traded higher on Friday, erasing some of the week’s losses after the prices had fallen to their lowest level in almost six weeks.

Baker Hughes Inc. said Friday that the number of rigs drilling for natural gas during the previous week fell by eight to 866–the lowest level since January 2010, suggesting less supply. However, the oilfield-services firm said the number of oil rigs grew by seven to 954, which could mute the impact of the gas-rig reduction since most oil wells also yield a significant amount of methane.

Meanwhile, natural gas for next-day delivery at the benchmark Henry Hub in Louisiana recently traded at $4.34/MMBtu, according to IntercontinentalExchange, up 29 cents from Friday’s average. Natural gas for Monday delivery at Transcontinental Zone 6 in New York traded at $4.69/MMBtu, up 34 cents from Friday.


By Dan Strumpf

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