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nymex natural gas soars record 38% in one day!!!

  1. munch

    3,567 posts.
    Nymex Natural Gas Soars Record 38% With Cold Slashing Supplies
    By Geoffrey Smith


    New York, Feb. 24 (Bloomberg) -- Natural-gas futures soared 38 percent, the biggest daily gain in 13 years of trading, because more cold Northeast and Midwest weather in the next few weeks may slash supplies in storage to the lowest ever, analysts said.

    Below-average temperatures this winter in the eastern and central U.S. have cut inventories by 43 percent from a year earlier. U.S. gas production is falling, and prices of alternative fuels such as heating oil are surging.

    ``We've moved into a new era of gas prices,'' Larry Nichols, chief executive officer of Devon Energy Corp., the third-biggest U.S. gas producer, said on a conference call with analysts. ``The way storage is being depleted, we are going to see strong prices the rest of the year.''

    Gas for March delivery gained $2.531 to $9.137 per million British thermal units on the New York Mercantile Exchange, the highest since Jan. 9, 2001. Gas for next-day delivery in the Midwest and Northeast more than doubled, based on average prices.

    Gas has more than doubled since late November, based on the most-active contract. Inventories have dropped 27 percent below the five-year average. Nymex heating oil for March delivery rose 3.82 cents to $1.1467 a gallon, a 23-year high, after reaching a record $1.1525.

    ``The gas crunch is hitting at the same time that crude is $36, and there's no place to turn,'' said Stephen Smith, an independent analyst with Stephen Smith Energy Associates. ``The last time we had some $10 gas, you had companies that had contracted gas for $3 and $4 sell their gas and shut down their plants.''

    Lowest Inventories

    Gas inventories fell 203 billion cubic feet, or 15 percent, to 1.168 trillion cubic feet in the week ended Feb. 14, the Energy Department said Thursday. Supplies dropped to a record 697 billion cubic feet in mid-April 1996. The second-lowest was 738 billion cubic feet in late March 2001.

    ``It dawned on everybody that we are actually on track to threaten 600 or 700 billion cubic feet in storage'' by the end of March, said Guy Gleichmann, senior trader at U.S. Investment Group in Miami. ``They're worried about getting below the all-time low.''

    High temperatures in Chicago will range from the 20s to the low 30s over the next couple of weeks, below the 40-degree average for this time of year, according to AccuWeather.com. Heating demand in New York City and the Northeast will be 17 percent above normal in the next week, Weather Derivatives said.

    The latest forecasts for lower temperatures early next month were below earlier predictions, and that helped boost prices, analysts said.

    The surge in prices for delivery tomorrow boosted futures, said Jim Duncan, an energy analyst with ConocoPhillips in Houston.

    The Midwest gas average surged $7.92 to $15.06 per million Btu, according to Bloomberg data. The Northeast soared $10.52 to $20.54, and the benchmark Henry Hub, Louisiana, price rose 88 percent to a record $13.

    Production Declines

    Stored supplies, kept in aquifers, salt caverns and depleted oil reservoirs thousands of feet underground, may fall to near a record by the end of March, typically considered the end of the U.S. heating season, analysts said. Production last year fell by 450 billion cubic feet, or 2.3 percent, from 2001, the Energy Department has said.

    ``Now that they're getting real demand, people are wondering how they're going to counter with production down,'' Gleichmann said.

    The U.S. heating season, when gas is withdrawn from storage, usually runs from December through March. Demand for gas and other heating fuels is typically highest in January. Eleven states in the Midwest account for two-fifths of gas demand in the U.S.

    Surging gas prices may boost Americans' heating bills more than forecast. A typical Midwest household will spend $762 this winter for gas heat, up 28 percent from $596 last winter, the Energy Department said earlier this month.

    Inventories Tumble

    Supplies will fall to about 738 trillion cubic feet by the end of March should weekly withdrawals from storage be slightly less than the five-year average of 74 billion cubic feet, said Marshall Steeves, an energy analyst at Refco Group Ltd. in New York.

    The most-active gas contract has closed above $4 per million Btu since mid-November and has closed above $5 since Jan. 7.

    ``Natural gas has never stabilized above $4 or $5 for longer than this,'' Gleichmann said. ``People are already worried about beginning next winter with a record-low amount in storage.''

    The March contract rose 7 percent on Friday to $6.606 per million Btu and has gained six sessions in a row. On Dec. 27, 2001, gas set records with a close of $9.978 and intraday high of $10.10. Before today, the biggest one-day gain on the most-active contract was 17 percent on Jan. 6, 1997.

    ``The elasticity of prices in this range is a lot higher,'' said Charlie Sanchez, an energy-markets manager at Houston-based Gelber & Associates. ``We don't have much history here, so the market tends to fluctuate a lot more.''

    Nymex oil for April gained 90 cents to $36.48 and has risen 78 percent in the past year.

    Oklahoma City-based Devon today agreed to buy rival Ocean Energy Inc. for $5.3 billion, expanding output by almost a third and gaining reserves in West Africa and the Gulf of Mexico.

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