Wednesday, September 15, 2010

Natural Gas Closes at $4.36/mmBTU


Natural gas futures rose Tuesday on the view that the seasonal low in prices may have passed and amid the continuing threat of tropical storm activity disrupting offshore production.
Natural gas for October delivery rose 2.8 cents, or 0.7%, to $3.966 a million British thermal units on the New York Mercantile Exchange, the highest settlement price since Aug. 24 and the third consecutive session of gains.
The benchmark gas contract has climbed for three consecutive sessions, leading to speculation that the seasonal low in prices has passed. Gas futures typically bottom in August or September as cooler temperatures reduce demand for natural gas-fired electricity to meet air-conditioning needs and the bulk of winter's gas heating demand is still months away.
"Traders are starting to wonder whether that was the bottom," said Chris Kostas, senior analyst with Energy Security Analysis Inc. "We're kind of at a crossroads over the next couple days."
Futures earlier Tuesday had climbed above the $4 level for the first time in almost three weeks, but gave up some of those gains later in the day.
"Psychologically, crossing $4 could be a hindrance," said Jay Levine, president of Portland, Maine-based Enerjay LLC. Gains in gas futures represented a slow change in investor sentiment, rather than a convincing upward trend. "There's no fire being lit underneath" the gas market, he said.
Some market participants are waiting for Thursday's weekly U.S. gas storage report before making firm bets that a seasonal rally is under way. Gas prices have hovered near 11-month lows for much of September, pressured by above- average inventories and high gas drilling activity.
Meanwhile, futures received some support Tuesday from the threat of production outages in the Gulf of Mexico, but no imminent storm threats are seen. The energy-rich Gulf is home to about 11% of U.S. gas production, and prices can jump if storms seem likely to disrupt production.
Government forecasters said Tuesday that a cluster of storms moving west through the Caribbean had an increased chance of forming a tropical cyclone. The National Hurricane Center said the low-pressure system had a 90% chance of becoming a tropical cyclone in the next 48 hours, up from 40% earlier Tuesday. But the storms are seen moving west across Mexico's Yucatan Peninsula, and aren't projected to threaten Gulf energy infrastructure.
In the Atlantic, Hurricanes Igor and Julia continue westward, but are expected to follow the path of some previous storms this season and turn north, missing the Gulf.

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