AS MANY OF YOU KNOW, WE HAVE BEEN CALLING THE NATURAL GAS MARKET A BUBBLE AND WE CONTINUE TO BELIEVE SO. PRICES ARE MUCH TOO HIGH TO BE JUSTIFIED GIVEN THE IMPROVEMENTS IN GAS DRILLING, AND THE PROJECTED INJECTIONS AND CURRENT SUPPLY LEVELS,
HERE IS A PASTE OF A REUTERS ARTICLE....INFORMATION IS PRICELESS, WHILE NATURAL GAS FAIR VALUE IS ONLY $3.20
2013'S GAS PRODUCTION TO EXCEED LAST YEARS BY 1%
By Joe Silha
NEW YORK, May 14 (Reuters) - Front-month U.S. natural gas
futures edged higher on Tuesday for a second straight day,
backed by cool Northeast weather early this week that has lifted
demand despite milder forecasts for later this week and next
Gas prices slid more than 11 percent in the previous three
weeks as moderating spring weather curbed heating loads but have
gained nearly 2 percent so far this week as temperatures cooled.
Chart traders agreed the market was oversold after a
three-week slide and due for a bounce, noting prices have tested
technical support in the $3.90 per mmBtu area several times over
the last week but so far have not settled below that level.
"Natural gas prices are attempting an upside breakout on
talk of cooler temperatures. However, without a significant
shift in the weather, we still see the fundamentals as bearish,
with pressure on the bulls to head for the exits over the next
month or so," Citi Futures analyst Tim Evans said in a report.
At 12:15 p.m. EDT (1615 GMT), front-month gas futures
on the New York Mercantile Exchange were up 5.4 cents, or 1.4
percent, at $3.979 per million British thermal units after
trading between $3.923 and $4.01.
The front contract hit a 21-month high of $4.444 two weeks
ago, then posted a five-week low of $3.883 last week.
Some traders noted that speculative investment funds may be
giving up on the recent bull run, at least temporarily. Last
week they trimmed their net long position in natural gas
futures, options and swaps for the first time in three months,
according to government data released on Friday.
Most traders, expecting milder weather to lead to more
above-average weekly inventory builds, see only limited upside
from here until hotter weather arrives and forces homeowners and
businesses to crank up air conditioners.
Commodity Weather Group said it expected U.S. temperatures
to mostly range from normal to slightly above normal for the
next two weeks, but no major heat was forecast for the period.
ANOTHER BIG INVENTORY BUILD EXPECTED
Data from the U.S. Energy Information Administration last
week showed that total domestic gas inventories rose by 88
billion cubic feet to 1.865 trillion cubic feet.
The weekly build was above the Reuters poll estimate of 83
bcf and well above the five-year average increase for that week
of 69 bcf, and initially pressured prices.
The gain was the fourth of the stock building season and
exceeded market expectations for the second straight week. It
trimmed the deficit versus the five-year average by 19 bcf, but
stocks are still 99 bcf, or 5 percent, below that benchmark.
That deficit is likely to shrink again in Thursday's EIA
report. Injection estimates range from 90 to 106 bcf, with most
in the mid-90s. Stocks rose 56 bcf during the same week last
year. The five-year average increase for that week is 83 bcf.
PRODUCTION CLIMBS DESPITE FEWER RIGS
Baker Hughes data on Friday showed the gas-directed
rig count fell last week by four to an 18-year low of 350.
Despite the steep decline in dry gas drilling, production
has not slowed much, if at all, from 2012's record highs.
The EIA last week raised its estimate for domestic natural
gas production in 2013, expecting output this year to be up
about 1 percent from last year. If realized, it would be the
third straight year of record production.
Disclosure: I am short UNG.
Additional disclosure: natural gas