NYMEX natgas ends higher on concerns about weather
NEW YORK, Nov 17 (Reuters) - NYMEX natural gas futures
ended up sharply on Friday, backed by short cover ahead of the
weekend on concerns that weather forecasts were turning colder
despite record high inventories and weaker crude, traders said.
December natgas <NGZ6> on the New York Mercantile Exchange
climbed 42.4 cents, or 5 percent, to close at $8.179 per
million British thermal units after stalling late at $8.25,
just shy of the three-month spot high of $8.26 hit last week.
Other winter months also gained, with February <NGG7>
ending up 37.4 cents at $8.674.
"The market is very weather sensitive. There's a lot of
anxiety about the erosion of the storage surplus, but when we
come in Monday, if we're still looking at mild weather, you'll
see prices come right off," said one southern-based trader,
noting prices stalled today at technical resistance.
Traders noted the gas market mostly shrugged off another
loss in crude, which shed 45 cents a barrel today after a $2.50
slide on Thursday.
While most traders agreed Thursday's 5 billion cubic feet
weekly natural gas stock build was in line with expectations
and neutral, they said high levels of gas in storage remained a
problem for the bulls.
The U.S. Energy Information Administration report showed
that total domestic gas inventories of 3.45 trillion cubic feet
were still at their highest levels ever for this time of year,
according to weekly derived data.
The huge stock surplus to year ago was cut by 49 bcf in
that report, but traders noted that overall storage was still
176 bcf, or 5 percent, above last year, and 238 bcf, or 7
percent, above the five-year average, a sizeable cushion that
has eased concerns about having adequate supplies this winter.
Early withdrawal estimates for next week's EIA report range
from 1 bcf to 32 bcf versus a 1 bcf adjusted build for the same
week last year.
Despite the pre-weekend run up, many traders remained
skeptical of the upside, expecting moderate weather, record
high storage and the end of nuclear plant maintenance this
month to temper buying until a broad-based cold front arrives.
After a mild week this week, temperatures in the Northeast
were expected to cool to below normal over the weekend and into
early next week, then moderate to near normal or slightly above
for the holiday weekend, according to the AccuWeather Web site.
Cool Midwest readings this week will mostly climb to above
normal late this week and next week,
Traders said that demand next week should be light
regardless of weather, noting many schools and businesses
typically close for long U.S. Thanksgiving holiday weekend.
The National Weather Service eight- to 14-day outlook
released on Thursday called for above normal temperatures for
most of the nation, except in the Southeast, Florida and
Northwest, where mostly seasonal readings were expected.
Meanwhile, U.S. nuclear plant outages early Friday stood at
about 5,200 megawatts above last year and about 600 MW above
the five-year average, according to Reuters data.
With the bulk of nuclear plant maintenance now over and
demand for gas-fired replacement power slipping, traders said
colder weather was needed to tighten the supply-demand balance.
Chart traders agreed the market seemed stuck in a broad
technical range between $7 and $8.50.
Above last week's three-month spot high of $8.26, December
resistance was pegged at $8.50, with major selling expected at
the prominent spot high of $8.619 from August. Support was seen
at $7.50 and then at the $7.06 low from two weeks ago.
In the cash Friday, Henry Hub weekend quotes lost 36 cents
to $7.23, with late deals weakening to 75-80 cents under NYMEX
from a 55-cent discount on Thursday. Prices on Transco at the
New York city gate shed 28 cents to $7.82 despite the cooler
weekend outlook, while Chicago was 31 cents lower at $7.23.
The NYMEX 12-month Henry Hub strip jumped 32.3 cents to
finish at $8.331. Henry Hub open interest on Nov. 16 fell 3,134
lots to 905,574.
