little info to think about from yesterdayToday’s rally doesn’t mean gas prices have completed a move lower, said George Ellis, a director in the energy derivatives group at BMO Capital Markets in New York.
“The market was very short and oversold,” he said. “From a technical perspective, the market is still suggesting lower. Gas is above the 18-day moving average, which is critical, but the 40-day is bigger and that’s higher.”
The 18-day moving average for natural gas is $4.018 per million Btu and the 40-day is $4.2621, according to data compiled by Bloomberg.
“It’s a big move, but we’re still building the case” for a gas rally, said Ellis. “This is more of a financial move than anything else. The bigger picture is still lower in the short term.”
Fewer Rigs
Declining onshore exploration in the U.S. will begin cutting into supplies in the coming months and help to lift gas prices, Jarvis said.
“When production stops, it’s going to jump off a cliff and the rig counts are telling you that,” he said.
About 45 percent of U.S. rigs have been shut since September, which means fourth-quarter gas production will tumble 5.2 percent, more than the 1.9 percent decline in demand, the Energy Department said.
Natural gas prices will average $6.84 per million Btu in the fourth quarter, according to a Bloomberg survey of 20 analysts. It may rise further in 2010 to average $7.50 for the year.