Higher U.S. gas prices seen next week after bullish AGA

NEW YORK, Nov 22 (Reuters) - U.S. natural gas prices are expected to continue their relentless march higher next week when traders return from the long holiday weekend, fueled by Wednesday's bullish weekly inventory report and cold weather forecasts for late next week.

"I think we're in for higher prices again next week. It was an absolutely bullish (American Gas Association) number, and even though the weather moderates a bit later this week, it's only briefly and then it gets cold again," said one East Coast trader, who did not rule out a NYMEX move above $7.00 per mmBtu next week if the cold weather forecasts hold.

The New York Mercantile Exchange closed at 1:00 p.m. EST on Wednesday and will be closed on Thursday and Friday for the U.S. Thanksgiving Day holiday.

On Wednesday, NYMEX December gas futures climbed 16.9 cents to close at $6.577 per million British thermal units (mmBtu) after rallying late to a new contract high and all-time spot continuation chart high of $6.62.

The move, backed by cold weather over much of the U.S., capped a four-day rally that saw the spot contract gain 13 percent.

And traders said more gains are expected, noting the December over-the-counter (OTC) market surged to $6.78 shortly after the AGA report before backing off to $6.62.

AGA data released after the NYMEX close today showed U.S. gas stocks fell last week by 94 billion cubic feet (bcf), well above Reuter poll estimates for a 55-65 bcf decline.

On average over the last five years, stocks have fallen 54 bcf this week.

The report showed draws were relatively heavy in all regions, as a broad-based cold wave over most of the nation forced operators to tap inventories despite already-low stocks before the onset of winter.

Total inventories of 2.648 trillion cubic feet (tcf) are 348 bcf, or 12 percent, below last year and still well below the five-year average.

And traders said they expected the storage gap to year-ago to widen sharply again in next week's report, noting stocks gained five bcf for the same year-ago week and some Arctic cold this week is likely to lead to another sizable drawdown.

"It was cold last week, but I think it was even colder this week. We should beat this week's draw in the next report," a southern trader said.

Traders said private 11-15 day forecasts calling for another shot of Arctic air for the eastern two-thirds of the nation also helped fuel bullish sentiment.

"At some point, we've got to see a pullback, but it all depends on how the weather looks when we come in Monday," the southern trader said, adding prices could swiftly slide if the cold fails to materialize.

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-- Carl Jenkins (somewherepress@aol.com), November 23, 2000