Wednesday, September 16, 2009

Natural Gas Prices Rise Again


NEW YORK -- Natural-gas futures soared Monday, driven by predictions the market has reached a floor as the winter heating season approaches.
Natural gas for October delivery on the New York Mercantile Exchange settled 33.7 cents, or 11%, higher at $3.297 a million British thermal units after reaching a high of $3.375 earlier in the day.

Gas traders, who have been betting heavily on falling prices over the past several months, have rushed to buy back previously sold contracts after the market fell to a 7½-year low in early September. Spurts of bargain buying have often been followed by selloffs the following day, causing wild price fluctuations, as when gas for October delivery fell 9% Friday after rallying 15% the previous day.

"We're rebounding off of Friday's price decline," said Pax Saunders, an analyst with Gelber & Associates, a Houston energy-advisory firm. "I think the market's now stalling here and looking for its next meaningful peak."

Traders have been trying to gauge whether an oversupply of the fuel and tepid demand will continue to depress prices, or whether a cold winter, drilling cutbacks and hints of economic recovery will send prices rallying in the coming months.

Gas prices often rise in September as traders look ahead to the winter, when demand for the fuel used to heat homes and businesses rises. Still, the front-month Nymex futures contract is down 55% from a year ago, and total gas in U.S. inventories as of Sept. 4 stood at 3.392 trillion cubic feet, about 17% higher than the five-year average and the year-earlier level.

Meanwhile, moderate temperatures as fall arrives are likely to limit demand for gas, adding to the glut. Meteorologists were predicting mostly normal temperatures across the eastern two-thirds of the U.S. through Oct. 14.

"With weather conditions still moderate around the country and industrial demand still severely constricted, prices will not be able to rally too far in the near term," wrote Mike Fitzpatrick, a broker with MF Global in New York, in a note to clients Monday.

In other commodity markets

SUGAR: Prices rose, supported by speculative buying as the market moved above an important technical chart level. Nearby October ICE Futures U.S. sugar rose 0.85 cent to 22.06 cents a pound.

COFFEE: Prices hit a four-week high, as roasters bought following recent price weakness. ICE December coffee rose 6.45 cents to $1.3310 a pound.

Write to Christine Buurma at
Printed in The Wall Street Journal, page C8

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