US Nat Gas futures rose to their highest mark on the year Monday, forecasts call for lower temperatures in the coming weeks signaled a likely pickup in demand for Gas-fired heating.
Nat Gas for Nov delivery settled + 16 cents, or 4.8%, higher at $3.480 a million British thermal units on the New York Merc, marking the 5th-straight session of rising prices and the highest settlement for a front-month contract since 6 Dec.
Futures rallied as weather forecasters called for a cold spell through much of the central US in the coming weeks.
Traders say the expected drop in temperatures is likely to prompt the 1st meaningful demand for Nat Gas used for heating, one of the most widespread applications for the fuel.
This is a season is the period in Autumn when gas demand typically slackens and prices fall, as Summer cooling demand falls off but winter heating demand has yet to kick in.
Analysts cautioned the recent rally might not last. The recent rise in Nat Gas prices may make Coal attractive again to some utilities, which could dampen Nat Gas demand. Technical indicators suggest the rally is over bought.
Long-term forecasts are calling for a milder-than-normal winter, said Morgan Stanley (NYSE:MS), which could lead to reduced demand for Gas-fired heating.
Nat Gas is used to heat about 50% of US homes. Analysts say heating demand represents 40% to 50% of the Q-4 Nat Gas demand, making the commodity particularly vulnerable to a warm Winter.
Paul A. Ebeling, Jnr.
Paul A. Ebeling, Jnr. writes and publishes The Red Roadmaster’s Technical Report on the US Major Market Indices, a weekly, highly-regarded financial market letter, read by opinion makers, business leaders and organizations around the world.
Paul A. Ebeling, Jnr has studied the global financial and stock markets since 1984, following a successful business career that included investment banking, and market and business analysis. He is a specialist in equities/commodities, and an accomplished chart reader who advises technicians with regard to Major Indices Resistance/Support Levels.