Gas Petrospective – October 14, 2010

Natural gas prices were up 6.7 cents yesterday as end-users decided to take advantage of recent declines in quotes. Producers stopped selling earlier in the week, and prices might have been able to advance more seriously if it had not been for steady fund selling. ETF and investment funds just have not seen any economic improvement as reasons to buy in this market.

The bears have also been very lucky that none of the numerous storms to have formed in recent weeks has had any real punch behind it near oil or gas producing or gathering systems. The storms have been either too weak when they have been near production or they have been strong in other areas. In any event, there has been no real output lost in weeks because of tropical activity.

We continue to see technical buying on the expectation that prices may have hit seasonal lows already. Prices remain very oversold and they are in support, here. The low that traders are now watching is at $3.545 per million Btu.

While oil prices continue to receive buying interest whenever we get news supporting a recovery, natural gas has been strangely ignored whenever we have had that. One would have expected any economic recovery to influence both oil and gas evenly. That has simply not been the case. Any economic recovery should be capable of increasing industrial baseload for gas just as easily as it would increase demand for diesel and well before any new jobs help gasoline. This has been something of a mystery this year.

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