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Wednesday May 10 5:11 PM ET
Natural Gas Rockets to 3-Year High
By DAVE CARPENTER, AP Business Writer
Natural gas prices roared to a three-year high Wednesday on the New York Mercantile Exchange after new industry figures aggravated concerns about unusually low storage levels as summer cooling season nears.
In other commodity markets, pork bellies flopped and soybeans, wheat and corn rallied sharply higher.
At a time of year when natural gas supplies are supposed to be rising and prices falling, just the opposite is happening.
The American Gas Association reported that storage grew by an unimpressive 58 billion cubic feet last week - well below the usual amount for early May.
That news helped drive natural gas for June delivery up 13.4 cents to $3.317 per 1,000 cubic feet, the highest for a spot-month contract since November 1997. The price has leaped 10 percent this week.
Analysts said power plants that use natural gas to generate electricity - demand for which soars in summer with air conditioning use and in winter with in areas that use gas heat - are finally buying after stalling for months in hopes high prices would fall.
``Time is running out on them now,'' said Victor Yu, an analyst for Refco Inc. in New York. ``They have to step in and buy it.''
In addition, an early-season heat wave in the northeastern United States has fueled demand and slowed storage injections at a time when inventory is usually being refilled. That has investors worried about dwindling supplies.
Yu said there's no panic about the possibility of shortages; rather, the latest surge signals that high natural gas prices are here to stay awhile.
``Prices will be very high,'' he said. ``It will probably stay high throughout the summer, and that makes for a more bullish scenario for the upcoming winter, too.''
Among other energy commodities, June crude oil fell 55 cents to $28.10 a barrel; June heating oil rose 1.90 cent to 73.28 cents a gallon; June unleaded gasoline fell 3.86 cents to 91.20 cents a gallon.
In London, June Brent crude from the North Sea fell 40 cents to $26.42 a barrel on the International Petroleum Exchange.
Pork belly prices crashed for a second straight day on the Chicago Mercantile Exchange as rising storage levels signaled weakening demand for bacon among the fast-food chains that have been using the pork-belly product more in recent months.
``The assumption for awhile was we were going to run out of product,'' said Dave Maher, an analyst for Securities Corp. of Iowa. ``Now the thinking is we've peaked on demand.''
July pork bellies fell 3 cents, the exchange-imposed limit, to 87.57 cents a pound.
``There will be a summer rally. But the question right now remains, 'From where?''' said Maher, emphasizing that the price slump is far from over.
Across town at the Chicago Board of Trade, grain and soybean prices jumped higher after a federal agency said the pattern of hotter and drier weather than usual may continue well into summer.
A rally that began on the strength of forecasts for warm weather in the next few days accelerated when the U.S. National Oceanic and Atmospheric Administration suggested the ongoing drought could last months longer.
Wheat for July delivery rose 61/2 cents to $2.75 a bushel; July corn rose 51/2 cents to $2.441/4 a bushel; July oats rose 21/4 cents to $1.23 a bushel; July soybeans rose 14 cents to $5.70 a bushel.
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