Natural Gas Has Biggest Gain in Four Months on Narrower Surplus

[frawin]

Low Natural Gas prices and the Obama/Pelosi & Company idiots have really put a stop to Drilling for Natural Gas and the storage gas trends are beginning to show the effects. Natural Gas took a 10% plus jump in the futures contracts today and the outer/Winter months are in the mid to high $5.00 ranges, be prepared for higher heating bills this winter.
Frank

Natural Gas Has Biggest Gain in Four Months on Narrower Surplus



By Mario Parker

July 16 (Bloomberg) -- Natural gas futures surged to their biggest gain in four months after a government report showed a narrowing U.S. stockpile surplus.

An inventory increase of 90 billion cubic feet in the week ended July 10 sent supplies to 2.886 trillion cubic feet, the Energy Department said. The total was 18.7 percent higher than the five-year average, down from 19.3 percent in last week's report and the fourth consecutive narrowing.

"We're seeing the impact of the rig count drops," said Phil Flynn, vice president of research at PFG Best in Chicago. "If they weren't cutting back on supply where would we be putting it? That's stopping a freefall below $3."

Natural gas for August delivery rose 38.5 cents, or 12 percent, to settle at $3.668 per million British thermal units at 2:50 p.m. on the New York Mercantile Exchange, the biggest one-day gain for a contract closest to expiration since a 13 percent increase on March 19. The futures were trading at $3.37 before the supply report was released at 10:30 a.m. Gas is down 35 percent this year.

Companies have responded to the drop in prices by slashing output and exploration. U.S. natural gas production will fall 0.6 percent to 58.23 billion cubic feet a day this year from 2008, according to the Energy Department.

Gas rigs operating in the U.S. dropped by 16, or 2.3 percent, to 672 in the week ended July 3, the lowest since May 10, 2002, according to Baker Hughes Inc.

"There has to be a reaction on both sides," said Lisa Zembrodt, an analyst at Summit Energy Services Inc. in Louisville, Kentucky. "Econ 101, lower prices encourage demand and decrease supply. The rigs are one piece and some production is price-sensitive."

Zembrodt said the report illustrates that supply and demand are becoming more balanced, citing a stockpile gain of 104 billion cubic feet a year earlier, even as mild weather and the impact of the recession has stifled demand.

Rig Count

Natural gas futures have fallen 73 percent from a 2008 high of $13.694 per million Btu as the recession cut demand for the industrial and power-generation fuel.

"This thing is ready to pop," said Lannie Cohen, president of Capitol Commodity Services Inc., a brokerage in Indianapolis. "A lot of people have shut down facilities and prices are so low that I don't think it can go any lower."

Technical analysis indicates that gas is poised to move higher, said Larry Young, a senior trader at Infinity Futures Inc. in Chicago.

"It's a technical phenomenon today on the upside," Young said.

The breakout was at "$3.527, which was yesterday's high, and we took out yesterday's low of $3.259," Young said. "In one day we reversed and that's extremely bullish. When we cleared yesterday's high people got bullish quick."

Technical traders monitor patterns on daily charts for clues to price direction, and may sell or buy based on those signals.

Last Updated: July 16, 2009 16:10 EDT