Reply #22: US (natural) GAS: Futures Settle Below $4 For First Time In Five Months [View All]

[Demeter]

http://online.wsj.com/article/BT-CO-20110804-719705.html?mod=dist_smartbrief

Natural-gas futures settled below the psychologically important $4 level for the first time since March on a decline triggered by weekly inventory data... Energy Department reported a larger-than-expected storage build, and natural gas faced pressure as other markets saw losses on concerns about global economic growth. Natural gas for September delivery settled down 14.9 cents, or 3.6%, at $3.941 per million British thermal units on the New York Mercantile Exchange. The benchmark contract reached the lowest settlement price since March 16, and fell as low as $3.915/MMBtu during the session.

Inventory data was just the latest bearish force on natural gas, as futures have declined in recent sessions on weather forecasts and weak economic data...The Energy Information Administration said U.S. natural-gas stockpiles rose by 44 billion cubic feet last week, well above the 36 bcf predicted by analysts surveyed by Dow Jones Newswires. Though hot summer weather tends to increase demand for natural gas to generate power for air conditioning, Horwitz noted that the injection was only 3 bcf below the five-year average of 47 bcf. "It's a pretty compelling argument that there's still a lot of supply out there," he said.

High production levels have led to lower natural-gas prices in recent years. The number of rigs drilling for natural gas is at 877 as of July 29, according to Baker Hughes Inc. (BHI), and the next rig count is due Friday. Horwitz and other analysts have said the gas-rig count must decline to close to 800 to balance production with demand...At the same time, oil wells can yield natural gas, and the oil rig count has risen to 1,025.

Futures stayed lower during Thursday's session as the Dow Jones Industrial Average and crude oil were down significantly, said John Woods, a trader with JJ Woods Associates. The Dow has fallen more than 400 points during trading, and Nymex crude settled below $87. Still, Woods said he'd be surprised if natural-gas prices fell much below $3.90, and said prices could bounce higher from $3.95. "It's more of a nice buying opportunity at this point," Woods said.
Meanwhile, temperature forecasts for next week aren't giving the market much support. Relatively cooler conditions are expected in the six- to 10-day forecast for the Midwest and East, Commodity Weather Group said.