Natural gas higher after steep drop
NEW YORK – Natural gas futures were higher Tuesday after steep losses in the previous session as investors keep watch for signs the latest gas rally is fading.
Gas tumbled 3.2% Monday, giving back most of last week's gains. The sharp reversal kept traders on edge Tuesday, with some concerned that losses this week could mean an end to the April rally that sent prices above $4 per million British thermal units for the first time in over a year.
After wavering between gains and losses early in Tuesday's session, natural gas for May delivery recently traded 3.9 cents, or 0.9%, higher, at $4.306/MMBtu on the New York Mercantile Exchange.
John Woods, a natural-gas trader at JJ Woods Associates, said prices may drift in a holding pattern until later this week. Government data on natural-gas stockpiles is due Thursday, and coincides with the expiration of May natural-gas options contracts, while May futures will expire at settlement Friday.
"It's hanging in there pretty good," he says, though he cautioned that declines could be ahead as warmer weather settles in across the U.S. next week. "We have room to move further down."
Weather forecasts are pointing to mild U.S. weather through the beginning of May, signalling low heating and air conditioning demand. Additionally, there are signs high prices may start reducing utilities' gas usage.
Private forecaster WSI Energycast said it expects warmer-than-normal weather across most of the central U.S. over the next six-to-ten days, reducing the need for gas-fired home heating in the region.
"There's a perception building that this thing has been extended beyond where it should be," said Bob Yawger, director of energy futures at Mizuho. "A pullback is justifiable at this point."
Roughly half of U.S. homes use natural gas for space heating. Over the past two months, colder-than-normal weather raised demand for the fuel, leading to big declines in domestic gas stockpiles, which raised futures prices.
U.S. gas supplies stand at 1.704 Tcf, according to data released last week by the U.S. Energy Information Administration. The inventory level is 4.2% below the five-year average for this time of year.
Record-high stockpiles last spring sent futures prices to decade lows below $2/MMBtu. But since then, prices have steadily recovered as low prices prompted increased burning of the fuel by power plants and cold weather raised residential demand.
Dow Jones Newswires