Natural Gas Rises as Lowest Prices in Four-Months Lure Buyers
By Reg Curren
July 28 (Bloomberg) -- Natural gas in New York advanced as the lowest prices for the fuel in four months attracted speculators.
Natural gas fell more than more than 31 percent this month, touching $8.883 per million British thermal units on July 24, the lowest intraday price since $8.664 on March 20.
``We have an oversold market and $9 has big technical support,'' said Chris Jarvis, president of Caprock Risk Management LLC in Hampton Falls, New Hampshire.
Natural gas for August delivery rose 8.7 cents, or 1 percent, to $9.171 per million Btu at 10:44 a.m. on the New York Mercantile Exchange. Gas is trading below its 200-day moving average of $9.495. The fuel fell below that average for the first time since Dec. 27, 2007, on July 24.
The August delivery contract expires tomorrow. Gas for September delivery rose 8.9 cents, or 1 percent, to $9.215 per million Btu.
``When prices fall that far, that fast, there's always a snapback,'' said Cameron Horwitz, an analyst at SunTrust Robinson Humphrey in Houston. ``It's a bargain right now.''
The fundamentals of gas, including inventories and an expectation of rising demand, will push prices toward $10 per million Btu for the remainder of the year, Horwitz said. Higher temperatures forecast for the next 10 days are also boosting prices today.
``Gas-fired cooling demand is expected to be above average in the gas-intensive regions, including eastern Texas, Florida and Alabama,'' said Horwitz.
Above-normal temperatures are anticipated to cover much of the U.S. through Aug. 6, the Climate Prediction Center in Camp Springs, Maryland, said in a forecast yesterday.
Natural gas is ``undervalued'' because warmer weather and storms may prevent inventories from being replenished further, Goldman Sachs Group Inc. said.
Gas prices between August and October will average $12.90 per million Btu and this winter will average about $13.40, Goldman analysts Samantha Dart and Jeffrey Currie said in an e- mailed report today.
Hedge-fund managers and other large speculators decreased their net-short position in New York gas futures in the week ended July 22, according to U.S. Commodity Futures Trading Commission data.
Speculative short positions, or bets prices will fall, outnumbered long positions by 100,240 contracts on the Nymex, the Washington-based commission said in its Commitments of Traders report. Net-short positions fell by 408 contracts from a week earlier.
Eight of 15 analysts surveyed July 25 by Bloomberg News, or 53 percent, said prices would rise through August 1. Four, or 27 percent, said prices would rise as the heart of the hurricane season in the U.S. approaches.
The cyclone season began June 1 and runs through November. Hurricanes Katrina and Rita curtailed Gulf production, prompting gas to touch $15.378 per million British thermal units on Dec. 13, 2005, the highest since gas began trading on the Nymex.
Supplies are 2.396 trillion cubic feet, or 12.7 percent, below the 2.743 trillion held in storage at this time last year, the Energy Department said July 24.
To contact the reporters on this story: Reg Curren in Calgary at email@example.com
Last Updated: July 28, 2008 10:48 EDT