RE: BloombergGood article sriss, looks very bullish here:
Natural Gas Futures Rise After Report Shows Narrowing Surplus
By Mario Parker
July 16 (Bloomberg) -- Natural gas surged more than 10 percent, the biggest gain in six weeks, after a government report showed a narrowing U.S. stockpile surplus.
An inventory increase of 90 billion cubic feet in the week ended July 10 sent supplies to 2.886 trillion cubic feet, the Energy Department said. The total was 18.7 percent higher than the five-year average, down from 19.3 percent in last week’s report and the fourth consecutive narrowing.
“The report was a little below average expectations, so that’s bullish,” said Lisa Zembrodt, an analyst at Summit Energy Services Inc. in Louisville, Kentucky. “That signals toward a tighter supply and demand balance.”
Natural gas for August delivery rose 33.3 cents, or 10 percent, to $3.616 per million British thermal units at 12:30 p.m. on the New York Mercantile Exchange, the biggest one-day gain since June 1. The futures were trading at $3.37 before the report was released at 10:30 a.m. Gas is down 36 percent this year.
Companies have responded to the drop in prices by slashing output and exploration. U.S. natural gas production will fall 0.6 percent to 58.23 billion cubic feet a day this year from 2008, according to the Energy Department.
“There has to be a reaction on both sides,” Zembrodt said. “Econ 101, lower prices encourage demand and decrease supply. The rigs are one piece and some production is price- sensitive.”
Rig Count
Gas rigs operating in the U.S. dropped by 16, or 2.3 percent, to 672 in the week ended July 3, the lowest since May 10, 2002, according to Baker Hughes Inc.
“This thing is ready to pop,” said Lannie Cohen, president of Capitol Commodity Services Inc., a brokerage in Indianapolis. “A lot of people have shut down facilities and prices are so low that I don’t think it can go any lower.”
Natural gas futures have fallen 74 percent from a 2008 high of $13.694 per million Btu as the recession cut demand for the industrial and power-generation fuel.
Technical analysis indicates that gas is poised to move higher, said Larry Young, a senior trader at Infinity Futures Inc. in Chicago.
“It’s a technical phenomenon today on the upside,” Young said.
The breakout was at “$3.527, which was yesterday’s high, and we took out yesterday’s low of $3.259,” Young said. “In one day we reversed and that’s extremely bullish. When we cleared yesterday’s high people got bullish quick.”
Technical traders monitor patterns on daily charts for clues to price direction, and may sell or buy based on those signals.
To contact the reporter on this story: Mario Parker in Chicago at mparker22@bloomberg.net.
Last Updated: July 16, 2009 13:28 EDT