HardAssetsInvestor

Written by Sumit Roy  |

September 27, 2012

Natural Gas Hits New High For The Year Of $3.29 In Anticipation Of Winter Demand

Details

On Friday, the EIA will release its latest production survey, with data for the month of July.

Meanwhile, in Canada, inventories rose to a record high last week of 692 bcf. The inventory surplus in that country is about 100 bcf, down from highs near 300 bcf during the spring, but still substantial.




In our view, the natural gas market is roughly balanced at these prices. The resilience of U.S. production has disappointed bulls once again, though some still anticipate that output may decline later this year or even next year.

However, barring evidence of a notable decline, natural gas may be capped under $4/mmbtu this winter. As always, the severity of temperatures will be a major driver of prices, but in any case, we foresee a range of $3 to $4/mmbtu, with the most upside potential very early in the heating season—from October to November.

Currently, gas is trading close to the highest levels of the year near $3.29. A technical breakout above these levels may spur more buying and push prices toward $3.75.

NATURAL GAS