US GAS: Futures Rise After Touching Three-Month Lows

NEW YORK (Dow Jones)--Natural-gas futures rose Monday as traders viewed the market's recent declines as an opportunity to buy despite warmer weather forecasts that may take a toll on gas-heating demand.

Natural gas for April delivery settled 11.8 cents, or 3.1% higher, at $3.927 per million British thermal units on the New York Mercantile Exchange.

The benchmark contract sank before the start of floor trading Monday, falling as low as $3.731/MMBtu, the lowest intraday levels since mid-November and enough to attract bargain hunters looking for an opportunity to enter the trade, market participants said.

"We're jumping up again after we hit that low," said Jim Garasz, a broker with Transworld Futures in Tampa. Futures were supported as traders sought to buy on the cheap after the market touched its lowest levels so far this year, Garasz said.

Futures have sold off sharply since the end of January, as traders bet that moderating forecasts would curb heating demand and allow strong North American production to replenish inventories.

Meanwhile, the number of rigs drilling for natural gas in the U.S. fell to a one-year low last week, according to Baker Hughes Inc. (BHI). The oil-field services provider said there were 899 rigs targeting gas last week, down by seven on the week and the lowest since February 2010.

Despite declines from 2010's highs near 1,000 rigs, some analysts say current activity is high enough to lead to strong production this year.

Monday's gains came despite weather forecasts that turned warmer over the weekend. Meteorologists expect mild temperatures over the central and eastern U.S. during the middle of March, likely curbing gas-heating needs.

Private forecaster WSI Corp. sees higher-than-normal temperatures from the Southwest and Rocky Mountains states through the Midwest and Gulf Coast March 13-17, with warmth lingering in the south and east thereafter.

Cooler temperatures are expected for the period in parts of the West Coast and New England, WSI said.

 
   FUTURES           SETTLEMENT         NET CHANGE 
   Nymex April         $3.927           +11.8c 
   Nymex May           $3.984           +9.7c 
   Nymex June          $4.042           +8.5c 
 
   CASH HUB          RANGE              PREVIOUS DAY 
   Henry Hub           $3.69-$3.82      $3.68-$3.79 
   Transco 65          $3.71-$3.85      $3.68-$3.75 
   Tex East M3         $4.00-$4.28      $3.96-$4.01 
   Transco Z6          $4.33-$4.85      $4.33-$4.50 
   SoCal               $3.69-$3.80      $3.63-$3.75 
   El Paso Perm        $3.57-$3.71      $3.53-$3.64 
   El Paso SJ          $3.57-$3.68      $3.54-$3.61 
   Waha                $3.58-$3.71      $3.59-$3.65 
   Katy                $3.66-$3.80      $3.63-$3.70 
(Source: http://online.wsj.com/article/BT-CO-20110307-711535.html)