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Natural gas futures regain strength after Monday’s rout

CommoditiesOct 23, 2012 11:35AM ET
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This article has already been saved in your Saved Items - Natural gas futures regained strength during U.S. morning trade on Tuesday, as investors returned to the market to seek cheap valuations following the previous day’s almost 5% plunge.

On the New York Mercantile Exchange, natural gas futures for delivery in November traded at USD3.505 per million British thermal units during U.S. morning trade, climbing 1.55%.       

It earlier rose by as much as 1.75% to trade at a session high of USD3.514 per million British thermal units.

Natural gas prices plunged 4.85% on Monday, as a round of profit taking emerged after futures rose to the highest level since December 2011 earlier in the session.

Market players continued to monitor weather forecasts over the next few weeks to gauge the strength of early-Autumn U.S. heating demand.  

Private forecaster MDA EarthSat said earlier that it expects a strong dose of cold weather to descend on the eastern half of the U.S. beginning next week, prompting bullish speculators to bet colder weather in the U.S. will lead to some early-Autumn demand for the heating fuel.

Meanwhile, the U.S. National Weather Service's six- to 10-day outlook issued Monday called for below-normal temperatures for about the eastern half of the country.

Natural gas futures often reach a seasonal low in October, when mild weather reduces demand, before recovering in the winter, when heating-fuel use peaks.

Meanwhile, market players continued to focus on bloated U.S. inventory levels. Total U.S. gas supplies stood at 3.776 trillion cubic feet as of last week, 5% above last year’s level and 7.1% above the five-year average for the week.

At the end of March, inventories were roughly 60% above the five-year average.

Early injection estimates for this Thursday’s storage data range from 52 billion cubic feet to 77 billion cubic feet, compared to last year's build of 95 billion cubic feet. The five-year average change for the week is an increase of 65 billion cubic feet.

Despite recent gains, concerns remain that U.S. inventories will end the injection-season above the record high of 3.852 trillion cubic feet, set last year.

The EIA projected earlier in the month that natural gas stocks are expected to hit a fresh record high of 3.903 trillion cubic feet on October 31.

Elsewhere on the NYMEX, light sweet crude oil futures for delivery in December sank 2.8% to trade at USD86.17 a barrel, while heating oil for November delivery fell 1.5% to trade at USD3.031 per gallon.

Natural gas futures regain strength after Monday’s rout

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