Monday, 11 April 2011

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Natural Gas Prices Rise for the First Day in Seven After Falling Below $4

  • Monday, 11 April 2011
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  • Natural gas futures rose in New York, rebounding from the first drop below $4 in three weeks, as traders bought back contracts sold during six days of declines.

    Gas gained 1.7 percent after falling to $3.99 per million British thermal units, the lowest intraday price since March 17. It had declined as warmer-than-normal weather cut demand for the heating and power-plant fuel.

    “We came down a lot in the last six days and this rally is alleviating the oversold condition,” saidKyle Cooper, director of research for IAF Advisors in Houston. “It’s the first time in a while we hit $4 support.”

    Natural gas for May delivery gained 6.7 cents to settle at $4.108 per million British thermal units on the New York Mercantile Exchange. The futures have dropped 6.7 percent this year. The contract’s 7.4 percent drop last week was the biggest weekly decline since the five days ended Feb. 11.

    “The fact that it fell briefly below $4 has got a few shorts a little nervous and they are saying, ‘Hey, it’s not going down anymore and let’s cover,’” Cooper said. Traders who sold gas contracts last week are buying them back, he said.

    Temperatures will be below normal from April 16 to April 20, according to MDA EarthSat Weather in Gaithersburg, Maryland.

    The high in New York on April 18 will be 56 degrees Fahrenheit (13 Celsius), 6 degrees below normal, according to AccuWeather Inc. in State College, Pennsylvania. The high in Chicagomay be 57 degrees, 3 lower than normal.

    Low-Demand Season

    About 52 percent of U.S. households use natural gas for heating, according to the Energy Department.

    “As we enter the low-demand shoulder season, the market will be under pressure,” said Carl Neill, an energy consultant at Risk Management Inc. in Atlanta.

    The number of gas drilling rigs in the U.S. fell 2 to 889 last week, according to Houston-based Baker Hughes Inc. The rig count was 7.3 percent lower than a year earlier.

    Funds and other large investors increased their gas buying positions on the Nymex in the seven days ended April 5, according to the Commodity Futures Trading Commission’s weekly Commitments of Traders report.

    Net-long positions in natural gas held by what the CFTC characterizes as managed money, including hedge funds, commodity pools and commodity-trading advisers, increased by 27,061 futures equivalents to 104,046 in the week ended April 5.

    Supply Report

    U.S. gas stockpiles declined 45 billion cubic feet in the week ended April 1 to 1.579 trillion cubic feet, the Energy Department reported last week. Supplies were 0.6 percent above the five-year average, down from a 4.4 percent surplus the previous week.

    The department will release its monthly Short-Term Energy Outlook tomorrow. The report will estimate gas production and prices for 2011 and 2012.

    Last month, the department said marketed gas production will average 62.29 billion cubic feet a day this year, up from last year’s 61.82 billion.

    Gas futures volume in electronic trading on the Nymex was 310,030 as of 2:40 p.m., compared with the three-month average of 322,000. Volume was 386,536 on April 8. Open interest was 942,484 contracts. The three-month average open interest is 902,000.

    The exchange has a one-business-day delay in reporting open interest and full volume data.

    (Source: http://www.bloomberg.com/news/2011-04-11/natural-gas-futures-rise-first-day-in-seven-in-n-y-after-drop-below-4.html)

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