Bullish

Gas price bulls can sit pretty this summer as industry analystsagree that the stage is set for strong demand, stressed supply andhigher prices in both the futures and cash markets.

In a break from the usual price downturns associated withend-of-the-week gas trading, many markets points posted no gain orsmall increases Friday. Northeast points were the notable exceptionas expected wintery weather for the weekend caused significantprice jumps.

Prices responded accordingly Tuesday as just about everythingturned bullish for the spot gas market – chilly to very coldweather almost everywhere, rising futures in three importantcategories (gas, heating oil and crude oil), and expectations of alarge withdrawal volume in this afternoon’s storage report.

Formed when one day’s high is lower than an adjoining day’s low,chart gaps are a technical feature that garner plenty of marketattention. And over the last two weeks, natural gas traders havedone just that; attempting to fill the more than dime void leftbetween the $2.305 low from Dec. 30 and the $2.20 high from Jan. 4.Each day since then, they have steadily chipped away at the gap bymaking higher highs in each of the last seven trading sessions.That set the stage last Friday. Would the futures market crumbleunder the weight of sagging holiday weekend demand, or continuehigher to plug the hole up to $2.305? That question was answeredsuccinctly Friday morning when buyers, armed with fresh weatherforecasts and propelled by stop-loss buying, bid the Februarycontract 7 cents higher to a $2.322 close.

In a new study forecasting gas supply and demand over the next15 years, GRI said demand will reach 32.7 Tcf by 2015, but theindustry will have to adapt to changing consumption patterns inorder to take advantage. The results of the report, titled “GRIBaseline Projection of U.S. Energy Supply and Demand to 2015, 2000Edition,” were released Tuesday at the National Press Club.

Duke Energy and El Paso Energy proudly put their third quarterearnings on display yesterday, touting improvements in unregulatedservices and downplaying drops in their respective gas transmissionperformances.

Despite bullish over the counter dealings and a constructiveopening, the natural gas futures market shuffled lower Monday asshort-term traders sold off newly acquired long positions. TheNovember contract notched a $3.02 high shortly after the open thenproceeded lower to its $2.86 low for the session. A late rallybolstered prices near the closing bell to $2.92, a 5.5-cent loss onthe day.

Feeding off bullish weather forecasts, the natural gas futuresmarket snapped back yesterday as local and fund traders added totheir growing long positions. That enabled the November contract toerase Thursday’s 13.6-cent downward retracement and retest the$3.00 level in active, pre-weekend dealings. The prompt monthfinished strongly and closed at $2.975, a 14.1-cent advance on theday.

With 87% of its reserves in gas, Chesapeake Energy Corp. CEOAubrey McClendon said his company is “a natural gas company onpurpose.” McClendon told attendees at the PLS Dealmakers prospectconference in Houston Wednesday that both the supply and demandsides look very bright for gas producers, especially relative tooil.