Modest

Buoyed by hot weather and spiking Northeast physical prices, natural gas futures ended higher Tuesday, as commercial traders continued to favor the long side of the market. After touching the $3.00 mark Tuesday afternoon for the first time since Aug. 1, the September contract ebbed slightly to close at $2.975, a 1-cent increase for the session. With 102,854 contracts changing hands, Tuesday’s heavy volume in the gas pit lent credibility to the up-move.

After failing to break below support in each of the past three trading sessions, natural gas futures turned higher Tuesday as traders covered short positions on constructive weather outlooks and ahead of fresh storage data due out Thursday morning. The August contract finished at $2.863, up 7.9 cents for the session but only 0.3 cents above its $2.86 opening trade. At 105,524, estimated volume was heavy for the session.

After failing to break below support in each of the past three trading sessions, natural gas futures turned higher Tuesday as traders covered short positions on constructive weather outlooks and ahead of fresh storage data due out Thursday morning. The August contract finished at $2.863, up 7.9 cents for the session but only 0.3 cents above its $2.86 opening trade. At 105,524, estimated volume was heavy for the session.

All the economic and political stars would have to be in alignment for even the relatively modest Canadian version of arctic natural gas development to make it into construction, says the senior partner.

A moderation of recently severe winter weather in several market areas is still on the way, but the cold retained enough grip Tuesday to spur small gains of about a nickel or less at a majority of points. Citygates in the Northeast were joined by Florida deliveries in recording larger advances, while western points were mostly flat to 3-4 cents lower.

The “steep” natural gas declines in the third quarter of 2001 are “unlikely” to be part of a trend, and so far have not been repeated in fourth quarter reports, according to Lehman Brothers latest exploration and production update. The analyst found that “early returns” from 45 of the largest producers “lead us to estimate that wellhead gas production fell 0.1-0.5%” compared to the third quarter. The analyst also expects a production decline this year to fall between 1.5-2.5%, and import growth and storage to “meet demand growth” in 2002.

The “steep” natural gas declines in the third quarter of 2001 are “unlikely” to be part of a trend, and so far have not been repeated in fourth quarter reports, according to Lehman Brothers latest exploration and production update. The analyst found that “early returns” from 45 of the largest producers “lead us to estimate that wellhead gas production fell 0.1-0.5%” compared to the third quarter. The analyst also expects a production decline this year to fall between 1.5-2.5%, and import growth and storage to “meet demand growth” in 2002.

Breaking out of the extremely-tight, 4-cent trading range that corralled prices for much of the session, natural gas futures moved lower Wednesday afternoon on the heels of a disappointing (for bull traders) announcement that only 124 Bcf was pulled from storage last week. The selling pressure was felt immediately after the 2 p.m. EST release and by 2:30 p.m. February had sunk to a new, life-of-contract low at $2.04. A slight up-tick at the closing bell lifted the prompt month to a $2.076 settle, down 3 cents for the session.

With a modest 4.1-cent advance and $2.291 close Tuesday, February natural gas futures took another baby step toward what analysts and technicians believe could be the formation of a price bottom. That may seem like a bold prediction considering the overwhelmingly bearish fundamental picture. But after lying dormant during the downward price spiral of 2001, and in consideration of the large speculative short position, bull traders are cautiously rearing their horns once again.