U.S. gas: Futures extend rally, settle +4.5c At $3.827/mmBtu

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Natural gas futures prices rallied for a second day, settling 4.5 cents higher at $3.827 per million British thermal units, on short-term weather-related demand and position adjustments ahead of Wednesday's expiration of the October contract.

The rise followed an 8.1-cent gain Monday, with the combined increase nearly erasing the loss of 12.8 cents over four days last week, when prices settled at their lowest level since Oct. 27.

The back-to-back gains were the first since midmonth, when gas last topped the $4 level. That key area was reached as storms temporarily disrupted much of the output in the U.S. Gulf. But prices remain far from that mark, with the peak of hurricane season past and no current threat to production facilities brewing.

The National Weather Service near-term forecast shows above-normal temperatures centered around Texas for the next six to 10 days, and temperatures turning briefly below normal in the South, which could trim the scope of injections into storage in coming weeks.

October-delivery natural gas futures settled 4.5 cents higher at $3.827/mmBtu. Position-squaring tied to the expiration of October options also drove buying, traders said. The November contract, which takes over as the front-month after October expires at Wednesday's settlement, gained 3 cents to settle at $3.875/mmBtu.

"It is difficult to say how bullish the temperature forecasts really are going to be, but after falling consistently, this market was apparently ripe for any bullish hand to take a turn at the price tiller," Peter Beutel, president of Cameron Hanover, said in a research note. "We have plenty of natural gas in storage right now and, with the shoulder months right in front of us, it seems unlikely that we should see any major consumption ahead of us until the middle part of December."

Some forecasts call for futures prices to return to the $4.50/mmBtu level, last seen in July, by year end.



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