Natural gas gains as cold snap helps cut U.S. inventory surplus

Price Response

Even with bearish weather forecasts, the market has been showing some “price stubbornness,” possibly as hedgers buy gas before winter demand arrives, Aaron Calder, senior market analyst at Gelber & Associates in Houston, said in a note to clients today.

This week’s inventory report will reflect heating demand from last week and how sensitive power plants are to rising gas prices, he said.

Above-average gas use at electricity generators has helped buoy demand during a seasonal lull. Power plants will consume an average of 21.22 billion cubic feet a day of gas from October through December, 13 percent higher than a year earlier, the Energy Department said in its monthly Short-Term Energy Outlook on Sept. 11.

The department predicted that coal-to-gas switching at power plants may slow and start to reverse as gas prices increase in the fourth quarter and in 2013.

Futures Volume

Gas futures may see support at $3.255 per million Btu and see temporary resistance at $3.546, Mike Fitzpatrick, editor of the Energy OverView newsletter in New York, wrote today.

Volume was 433,957 contracts as of 2:42 p.m. in electronic trading, exceeding the 333,913 contracts traded during yesterday’s Columbus Day federal holiday. The three-month average is 381,000. Open interest was 1.18 million contracts. The three-month average is 1.11 million.

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

Bloomberg News

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