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Natural gas leads energy strength

Traders eye oil, natural-gas supply estimates, weather

By Myra P. Saefong, MarketWatch
Last Update: 10:57 AM ET Nov. 29, 2005

SAN FRANCISCO (MarketWatch) -- Natural-gas futures rose as much as 4% Tuesday, while crude-oil prices gained ground modestly ahead of government reports due this week that may reveal the first sizable inventory declines of the season for both commodities.

Natural gas for January delivery climbed to a high of $12.15 per million British thermal units on the New York Mercantile Exchange. It was last up 33.6 cents, or 2.9%, at $11.97.

January crude tacked on 9 cents to trade at $57.45 a barrel.

Rounding out the energy action, December heating oil climbed 2.94 cents to $1.665 a gallon and December unleaded gasoline traded at $1.4325 a gallon, up 1.43 cents.

"Short side traders could be in for a rude awakening as colder temperatures and snow are predicted for the Northeast very shortly," said veteran commodities trader Kevin Kerr.

"The energy markets, especially heating fuels, have a very short memory and once the snow starts to fly and demand ramps up, all of this discount could disappear and we will be in the crux of winter heating season," said Kerr, who also edits Global Resources Trader, a newsletter service of MarketWatch, publisher of this report.

The Energy Department will issue its latest update on petroleum supplies Wednesday, with most analysts expecting a decline in crude the nation's inventories to be reported for the week ended Nov. 25.

Crude supplies likely fell between 1 million and 3 million barrels, according to IFR Markets. They were likely down 2.5 million, Wachovia Corp. estimated. By contrast, Fimat USA predicts an increase of 1.9 million barrels.

IFR also said distillates, which include heating oil, probably rose between 500,000 barrels and 1.5 million barrels last week, while Wachovia pegged the increase at the middle of that range. Fimat's estimate again differs, with a 750,000-barrel decline forecast.

Analysts are widely expecting an increase in motor gasoline stocks, with IFR looking for a rise of 1 million to 2 million barrels, Wachovia predicting a buildup of 1 million barrels, and Fimat expecting supplies to be up 600,000 barrels.

On Thursday, the Energy Department will release its update on natural-gas supplies in storage. Analysts at Platts predict that inventories fell 48 billion cubic feet last week, while IFR's forecast puts the estimated decline at between 35 billion and 45 billion cubic feet.

In equities, energy shares followed futures prices higher Tuesday, with the Amex Natural Gas Index ($XNG:
amex natural gas index
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Last: 381.58+2.50+0.66%

11:00am 11/29/2005

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FinancialsMore $XNG$XNG381.58, +2.50, +0.7%) setting the pace among the sector benchmarks. See Energy Stocks.

Elsewhere, gold futures climbed over $500 an ounce for the first time in 18 years during overnight trading but dulled in Tuesday's Nymex session. See Metals Stocks.

Taking a broad measure of the commodity-futures markets, the Reuters/Jefferies CRB Index stood at 313.4 points, up 0.2% on the New York Board of Trade.