Natural Gas Rises Most in a Month on Outlook for Lower Supplies

[frawin]

All of the Operators that I do work for have stopped drilling altogether.



Natural Gas Rises Most in a Month on Outlook for Lower Supplies




April 17 (Bloomberg) -- Natural gas futures rose almost 4 percent, the biggest gain in four weeks, on speculation declining exploration and decisions by oil and gas companies to trim output will reduce supplies in coming months.

The number of onshore gas rigs seeking new deposits in the U.S. has dropped 53 percent since September as prices tumbled. Chesapeake Energy Corp., the second-biggest independent U.S. gas producer, said yesterday it has curtailed about 400 million cubic feet a day of output.

"The two bullish things you can hang your hat on are production destruction through rig counts moving lower and we're moving into summer, where people will be forced to buy gas and crude," said Brad Florer, a trader at Kottke Associates Inc. in Louisville, Kentucky. "There could be a $1 bounce and that would prompt some short covering, though overall I'm going to sell the rallies."

Natural gas for May delivery rose 13 cents, or 3.6 percent, to settle at $3.729 per million British thermal units at 3:05 p.m. on the New York Mercantile Exchange, the biggest one-day gain since March 19. Gas rose 3.3 percent this week and has dropped 34 percent this year.

Natural-gas rigs operating in the U.S. fell by 30, or 3.8 percent, to 760, the lowest since the week ended March 14, 2003, according to data compiled by Baker Hughes Inc. The count is down from a peak of 1,606 on Sept. 12.

Consumption of the factory and power-plant fuel increases during the summer months, when electricity is needed for air conditioners. Industrial and power generation demand each account for about 29 percent of gas use in the U.S.

'Getting Bullish'

"Technically, I'm getting bullish," said Carl Neill, an energy analyst at Risk Management Inc. in Chicago. "The pricing trend has stabilized on the 40-day moving average" for full- year 2010 futures prices.

Crude oil futures formed a similar pattern, with the 10-day moving average crossing above the 40-day on longer-dated contracts, before it rallied earlier this year, Neill said. A shorter-term moving average intersecting a longer-term average that way typically indicates higher prices will follow.

"We've factored in an awful lot of negative sentiment into the natural gas market right now and I don't know what else you can throw at it," said Neill. "People may be covering some shorts."

A speculative short is a bet that prices will decline.

The price difference of more than $2 between gas now and next winter, a situation known as contango, will also spur buyers to lock in lower prices now and sell gas later for a profit, said Neill.

Gas for January delivery is trading at $5.969 per million Btu, or a premium of about 60 percent, according to data compiled by Bloomberg.

Inventory Report

Supplies gained 21 billion cubic feet in the week ended April 10 to 1.695 trillion cubic feet, the Energy Department said yesterday.

Demand for gas to run factories and make chemicals, plastic and steel will drop 7.4 percent this year as manufacturing slows in the U.S., the department estimated in a report on April 14.

Florer said he's skeptical of a significant enough recovery in the economy this year to lift demand and prices for gas. He doesn't expect the economy to rebound until the first quarter of next year.

"I hear some people talking that gas will double by the end of the year, though I just don't see it," Florer said. "I don't see how you look at current technicals and fundamentals and predict a turnaround of that magnitude, barring some unforeseen event."

Consumer confidence in the U.S. rose for a second month, increasing the odds that the recession will end this year.

The Reuters/University of Michigan preliminary index of consumer sentiment rose to 61.9 from 57.3 in March. The index reached a three-decade low of 55.3 in November.

[Varmit]

don't worry...the new "green" enegry sources are gonna save us all from those evil fossil fuels