-- Brief warm spell spurs profit-taking
-- Prices hover near six-month high near $4/mmBtu
-- Sharp turn colder for Midwest, East in next six-10 days
By David Bird
NEW YORK--Natural-gas futures traded lower Tuesday as forecasts
for a brief spell of warm temperatures provided a pause in an
eight-day rally that lifted prices to six-month highs.
Analysts said that after a flurry of profit-taking, prices could
march higher again as forecasts call for a dramatic turn colder in
key gas-heating markets in the next six to 10 days.
Natural gas for January delivery on the New York Mercantile
Exchange traded 0.4 cent lower, at $3.984 per million British
thermal units. Front-month gas surged 12.1%, or 43.2 cents, over
the prior eight sessions, edging up toward $4/mmBtu for the first
time in six months. The contract settled Monday at $3.988/mmBtu,
the highest price since June 5.
A prolonged cold spell across the Midwest and the Eastern U.S.,
major markets for gas-fired home heating, sparked the run-up in
prices and some market participants are expecting a replay of that
in coming weeks.
"We see odds as strong of new highs in today's trade with
January futures closing above the $4 mark either today or
tomorrow," said Jim Ritterbusch, president of Ritterbusch and
Associates.
Mr. Ritterbusch said he believes the recent cold means gas
inventories were drawn down much more than normal last week to meet
demand. He expects data due out at 10:30 a.m. EST Thursday from the
Energy Information Administration to show inventories dropped by
140 billion cubic feet in the week ended Nov. 29. That would be
nearly 100 bcf more than the five-year average drop for the
week.
EIA said that in the week ended Nov. 22, gas in storage totaled
3.776 trillion cubic feet, down 2.6% from a year earlier and 0.5%
above the five-year average for that week.
For now, traders said, strong demand may overshadow concerns
over record-high output and the potential for power utilities to
switch to burning coal instead of increasingly more expensive
gas.
Mr. Ritterbusch said he believes prices could soon climb to
$4.12/mmBtu, a level last seen in late May, if the cold forecasts
prove correct.
Forecasters at MDA said warm weather in the Midwest and East
over the next five days is expected to yield to blast of cold air
that will dramatically reverse current conditions. In Chicago,
average temperatures are expected to be 14.5 degrees above normal
on Wednesday, but will drop to 15.5 degrees below normal averages
on Saturday. Similar forecasts hold through the northeast. Boston
average temperatures will swing from 9.5 degrees above normal on
Thursday to 8 degrees below normal on Sunday and hover in that area
for much of next week.
Natural gas for next-day delivery at the benchmark Henry Hub in
Louisiana recently traded at $3.835/mmBtu, according to
IntercontinentalExchange, versus Monday's average of $3.8275.
Natural gas for next-day delivery at Transcontinental Zone 6 in New
York traded at $3.82/mmBtu, down from $3.825 on Tuesday.
Write to David Bird at david.bird@wsj.com
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