NYMEX natural gas futures rally on severely cold US forecasts

By OGJ editors
HOUSTON, Jan. 7 -- Natural gas futures prices rose Tuesday on the New York Mercantile Exchange, supported by cold weather forecasts for parts of the US and also by firm support in early crude oil futures trading.

The February contract for benchmark US light, sweet crudes briefly reached $34.35/bbl—the highest level since before the war with Iraq in March.

By the end of the trading session, February crude had slipped by 8¢ from Monday's close to settle at $33.70/bbl Tuesday on NYMEX. The March position dipped by 3¢ to $33.48/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., slipped 5¢ to $33.73/bbl Tuesday.

Fitch Ratings in New York said its analysts believe that crude oil will start to return to lower levels sometime later in 2004, dropping from the above $30/bbl range to levels closer to $20/bbl.

Producers outside the Organization of Petroleum Exporting Countries play a role in that price forecast.

"This decrease will be driven largely by increasing Iraqi exports and non-OPEC production increases as well as Saudi reluctance to give up market share long term. Fitch also expects natural gas prices will moderate sometime after the first quarter
of 2004 from over $5.44/Mcf for 2003 year-to-date to levels around the $4/Mcf range as current natural gas inventories should be more than adequate to meet peak winter consumption," Fitch said in a research note on energy commodities' price outlook for 2004.

As a result of strong oil and gas prices during the last 4 years, most integrated and upstream company balance sheets and credit profiles are strong, the agency said.

"Although Fitch expects some softening of oil and gas prices longer term, realized prices should still remain relatively robust, and resulting cash flow for companies should still be ample and provide for adequate credit protection," analysts noted.

Other prices
Meanwhile, heating oil for February delivery jumped by 0.90¢ to 97.74¢/gal Tuesday on NYMEX, amid continuing forecasts for severely cold weather in the northeastern US. Unleaded gasoline for the same month slipped by 1.14¢ to 96.55¢/gal.

The February natural gas contract rose by 25.5¢ to $7.08/Mcf Tuesday on NYMEX, based "early psychological support from firm crude oil prices," said analysts Wednesday at Enerfax Daily. "Temperatures in New York are expected to drop to 27° [F] today through Saturday."

In London, the February contract for North Sea Brent oil dipped by 7¢ to $30.82/bbl Tuesday on the International Petroleum Exchange. Gas oil for January delivery increased by $7.00 to $290.25/tonne. However the February natural gas contract slipped by 25¢ to $5.29/Mcf Tuesday on IPE.

The dollar sank to a new low against the euro Tuesday. In late New York trading, the euro was at $1.2739.

The average price for OPEC's basket of seven benchmark crudes gained 48¢ to $30.33/bbl Tuesday.

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