Steven Schork: NG Bulls Should Have Their Heads Examined!

Discussion in 'Commodity Futures' started by MP Trader NYC, Oct 23, 2011.

  1. US GAS: Futures Rise On Inventory Data, Weather Patterns

    OCTOBER 20, 2011, 3:29 P.M. ET.
    NEW YORK (Dow Jones)--Natural-gas futures settled higher Thursday, after a government report showed natural-gas storage inventories growing less than expected and colder weather was predicted for much of the country.

    Natural gas for November delivery ended the day up 4.4 cents, or 1.2%, at $3.63 a million British thermal units on the New York Mercantile Exchange.

    In its weekly inventory report, the U.S. Department of Energy reported a build of 103 billion cubic feet in natural-gas storage. Analysts were expecting growth of about 110 billion cubic feet, on top of last week's build of 112 billion. Such numbers would have been seen as bearish for demand, but the lower-than-expected number gave traders hope that the market will not be over-supplied. Futures traded flat ahead of the announcement, but jumped as much as 4% after the release before settling back.

    Analysts pointed out that although the inventory growth was less than expected, it was still a very large number. The U.S. now has 3.624 trillion cubic feet of natural gas in storage--not far from its all-time high of 3.840 trillion reached last year.

    "Anyone who wants to spin 103 billion cubic feet as bullish should have their head examined," said Stephen Schork, president of research firm The Schork Group. "It's stupidity on stilts. It's a lot of gas in the market."

    The massive amount of supply, coupled with lower demand during the mild weather of so-called shoulder season, has depressed prices, which have fallen more than 25% since June. Now, cooler weather is expected over the South, Midwest and much of the East Coast in the next six to 10 days, which should drive demand. Natural gas is a key component in power generation, and demand rises and falls as people heat and cool their homes.

    "Just because we're at such low levels, it doesn't take much to move it higher," said Kent Bayazitoglu, an analyst with consultancy Gelber & Associates in Houston. "There's more room for it to move higher than lower right now."

    -By Christian Berthelsen, Dow Jones Newswires; 212-416-2381;