Today average gas price

NEW YORK -- Natural gas prices, which have declined more than 15 percent in the past week, clawed back some ground Tuesday morning based on forecasts of cold weather and technical activity, traders said.

The November Henry Hub futures contract on the New York Mercantile Exchange was up 15 cents at midday Tuesday to $4.93 per million British thermal units (mmBtu), about 10 percent higher than a year earlier but well below prices of more than $5.60 per mmBtu seen last week.

Short-term forecasts predicted below-average temperatures in high-demand areas in the Northeast, giving some support to prices, but traders said prices were unlikely to rise much further. "Don't read too much into (today's rise)," one natural gas trader said. "The prices we saw last week were way overblown; we're still correcting that." He said that technical activity had driven prices higher at the beginning of the month but fundamentals were bearish in the short term.

Last week's Energy Department storage report showed another rise in stock levels to 2.944 trillion cubic feet. The amount of gas in storage currently is about 6 percent lower than the comparable 2002 period but almost level with the five-year average.

A figure of 3 trillion cubic feet in storage by Nov. 1 is viewed as sufficient to prevent any winter shortages, given normal weather conditions. Most observers expect there to be 3 trillion cubic feet in storage by Nov. 1, according to a New York-based energy broker. "It will take some extraordinarily harsh winter weather to eat into these storage levels," he said.

Most natural gas is stored in underground salt caverns. As storage approaches capacity, rising pressure in the caverns makes it more difficult to add extra supplies, bringing gas back onto the market, which helps to drive down prices.

"At this time, I don't see prices much higher than $5 (per mmBtu) this winter unless the weather gets really bad," the broker added.

Kevin Foster

kfoster@amm.com