US GAS: Bargain Buying Lifts Futures To 2-Week High

NEW YORK (Dow Jones)--Natural gas futures rose to two-week highs Friday as bargain buying lifted a market that had fallen for the previous four weeks.

Natural gas for April delivery settled 13.3 cents, or 3.4% higher, at $4.005 a million British thermal units, the highest ending price since Feb. 9.

Gas for March delivery expired at settlement Thursday at $3.793/MMBtu, the lowest settlement since late October. The contract fell by more than 12% during its time as the nearby futures benchmark as the frigid weather that had kept a floor under gas demand gave way to milder temperatures.

"This market has been in a downtrend for a while," said Mark Waggoner, president of Excel Futures. "It was easily oversold."

Futures have found support during the last year when the market dipped below $4/MMBtu, as consumers of the fuel took the opportunity to buy at bargain prices.

Some market participants who had bet that prices would fall were buying back those positions Friday to lock in profits after the market's recent declines, traders said.

Managed money funds "have been massively short this futures market for some time," said Tom Saal, a vice president of energy trading with INTL Hencorp Futures. "If even 5% of them start buying back, you can get a rally."

Thursday's declines came after the Energy Information Administration reported a smaller-than-average draw from U.S. stockpiles last week as mild weather reduced gas demand. The small draw reinforced the view that supplies will be ample to meet coming heating needs.

Forecasts Friday were largely unchanged from previous outlooks. Weather in parts of the north-central U.S. and the West Coast should trend colder than normal during the next two weeks, meteorologists with MDA EarthSat said, while normal or above-normal temperatures are seen stretching from Texas through the Southeast and the Middle Atlantic states.

Meanwhile, the number of rigs drilling for gas in the U.S. rose by one this week, to 906, Baker Hughes Inc. said. Despite predictions that gas drilling would slow in response to low prices, the count has held steady at levels that are seen leading to increased production.

The EIA in its latest outlook saw U.S. marketed gas production increasing by 0.8% in 2011 compared with year-earlier levels.

On the week, futures rose by 3.3%, the first weekly gain since mid-January.

 
   FUTURES           SETTLEMENT         NET CHANGE 
   Nymex April         $4.005           +13.3c 
   Nymex May           $4.073           +13.3c 
   Nymex June          $4.133           +12.6c 
 
   CASH HUB          RANGE              PREVIOUS DAY 
   Henry Hub           $3.76-$3.82      $3.77-$3.85 
   Transco 65          $3.77-$3.80      $3.76-$3.81 
   Tex East M3         $4.06-$4.26      $4.10-$4.25 
   Transco Z6          $4.55-$5.08      $4.25-$5.35 
   SoCal               $3.85-$3.92      $3.89-$3.92 
   El Paso Perm        $3.71-$3.80      $3.75-$3.81 
   El Paso SJ          $3.70-$3.77      $3.75-$3.80 
   Waha                $3.69-$3.80      $3.73-$3.77 
   Katy                $3.72-$3.82      $3.71-$3.77 
 

 

(Source: http://online.wsj.com/article/BT-CO-20110225-711827.html)