Capstone Energy Services


US Gas Contract Ends Unchanged; Traders Watch Gulf Storm

July 28th, 2011

NEW YORK (Dow Jones) – The August natural-gas contract ended unchanged in its last day of trading as traders looked ahead to storage data and a weather system in the Gulf of Mexico.

Natural gas for August delivery settled unchanged at $4.370 per million British thermal units on the New York Mercantile Exchange. The most actively traded contract, for September delivery, settled down 1.3 cents, or 0.3%, at $4.318/MMBtu.

Futures began the session higher, but struggled to maintain momentum. Continuing heat across parts of the eastern U.S. and even some tropical activity couldn’t lift prices.

There is now a near-100% chance that a weather system in the southwestern Gulf of Mexico will become a tropical cyclone in the next 48 hours, the National Hurricane Center said.

Wells in the Gulf of Mexico account for about 7.2% of U.S. natural-gas production. While the Gulf isn’t the center of production for the fuel, traders still pay attention to storms there as they can hamper production or affect demand.

“Anytime the market has a threat of hurricanes ,the market will perk its ears up,” said Jay Levine, president of Enerjay LLC.

There is a reasonable likelihood that the market will see an increase in prices because of the tropical activity, but that hasn’t happened yet and whether it does happen “depends on how scared the bears get,” Levine said.

Some nonessential personnel for oil and gas producers Royal Dutch Shell PLC (RDSA, RDSB), Anadarko Petroleum Corp. (APC) and Apache Corp. (APA) in the western Gulf have been evacuated from platforms, but traders shrugged off the storm threat during the session.

“Today’s lackluster trade amidst continued seemingly supportive temperature outlooks and the first significant storm factor of the season would appear to tip the scales in favor of a bearish response to [Thursday’s] data,” said Jim Ritterbusch, head of trading advisory firm Ritterbusch & Associates, in a client note.

Ritterbusch wrote that his firm still has a near-term bullish view for natural gas, however.

In a Dow Jones Newswires survey, analysts and traders said they expect the Energy Information Administration Thursday to report that 41 billion cubic feet of gas was added to storage during the week ended July 22. That result would be above last year’s 31-bcf storage build but below the five-year average injection of 49 bcf.

Onshore-production levels remain robust, and traders will be watching to see how much last week’s heat wave and record levels of electricity demand affected the amount of the fuel added to storage.

The EIA’s natural-gas inventory report is scheduled to be released Thursday at 10:30 a.m. EDT.

FUTURES                              SETTLEMENT                            NET CHANGE
Nymex August                         $4.370                                           unch
Nymex September                    $4.318                                           -1.3c
Nymex October                        $4.333                                           -1.4c

CASH HUB                                 RANGE                                  PREVIOUS DAY
Henry Hub                               $4.41-$4.48                                $4.40–$4.445
Transco 65                              $4.42-$4.49                                $4.40–$4.47
Tex East M3                            $4.75-$4.8225                            $4.70–$4.75
Transco Z6                              $4.85-$5.00                                 $4.80–$4.95
SoCal                                      $4.43-$4.49                                  $4.41–$4.48
El Paso Perm                          $4.34-$4.40                                  $4.295-$4.36
El Paso SJ                               $4.22-$4.24                                  $4.185-$4.20
Waha                                       $4.39-$4.42                                  $4.36–$4.3825
Katy                                         $4.38-$4.43                                  $4.35–$4.40


By Amy D’Onofrio

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