MARKET WATCHNatural gas futures price soars to 6-month high

Dec. 5, 2003
The January natural gas contract shot up by 58.1¢, or 10%, to a 6-month high of $6.34/Mcf Thursday on the New York Mercantile Exchange, following a report of a larger-than-expected draw of gas from US underground storage during the week ended Nov. 28.

Sam Fletcher
Senior Writer

HOUSTON, Dec. 5 -- The January natural gas contract shot up by 58.1¢, or 10%, to a 6-month high of $6.34/Mcf Thursday on the New York Mercantile Exchange, following a report of a larger-than-expected draw of gas from US underground storage during the week ended Nov. 28.

The price soared as speculative funds scrambled to cover a nearly record number of exposed sales positions, after the US Energy Information Administration reported withdrawal of 59 bcf of natural gas from US underground storage last week, well above the consensus of Wall Street analysts for that period.. However, some analysts claimed the price escalation was driven by an underlying demand for natural gas that is stronger than many previously anticipated.

"The cold snap across much of the nation this week helped back the recent rally, which has seen prices surge nearly 30% this week as shorts [traders with open sales positions] were forced to cover as a series of technical resistance points were breached," said analysts Friday at Enerfax Daily.

Meanwhile, J. Marshall Adkins, an analyst in the Houston office of Raymond James & Associates Inc., St. Petersburg, Fla., reported Dec. 1, "US gas production is falling and will continue to fall regardless of increased drilling activity. Simply put: If production keeps falling, then the market must ration natural gas with higher prices."

Oil prices rise
The January contract for benchmark US light, sweet crudes gained 16¢ to $31.26/bbl as the market reacted positively to the decision Thursday by ministers of the Organization of Petroleum Exporting Countries to maintain production quotas at a total 24.5 million b/d, pending another extraordinary meeting Feb. 10 in Algiers when they will again assess market conditions (OGJ Online, Dec. 5, 2003). The February contract for benchmark crudes gained 20¢ to $31.13/bbl on NYMEX. On the US spot market, West Texas Intermediate crude at Cushing, Okla., advanced by 15¢ to $31.28/bbl.

Heating oil for January delivery jumped by 1.57¢ to 88.19¢/gal on NYMEX. Unleaded gasoline increased by 0.32¢ to 85.96¢/gal.

In London, the January contract for North Sea Brent oil inched up by 9¢ to $29.23/bbl on the International Petroleum Exchange. Oil futures prices may drift lower in that market as trading slows for the Christmas holiday, but there is no reason for prices to slump yet, brokers said.

Gas oil for December delivery gained $6 to $260/tonne. The January natural gas contract jumped by 23.9¢ to the equivalent of $5.92/Mcf on IPE.

The average price for OPEC's basket of seven benchmark crudes increased by 34¢ to $29.02/bbl Thursday.

Contact Sam Fletcher at [email protected].