U.S. gas: Futures rebound on debt deal

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Natural-gas futures edged higher Monday as the market got a slight boost from a tentative agreement by U.S. lawmakers to raise the country's debt ceiling.

The market saw some buying interest to start the week, and futures rebounded from last week's losses to follow oil and equities higher.

Natural gas for September delivery recently traded up 5.6 cents, or 1.4%, to $4.201 a million British thermal units on the New York Mercantile Exchange.

The natural gas market hasn't been closely tied to the debt ceiling negotiations of the past week, but trader sentiment was lifted by the Sunday evening announcement of a deal between Congressional leaders and U.S. President Barack Obama to raise the debt ceiling and cut spending in an effort to avoid a default.

The advance in natural gas futures Monday morning "is being largely fueled by bullish spillover from the equities and oil complex," said Jim Ritterbusch, head of trading advisory firm Ritterbusch & Associates, in a client note.

Futures aren't necessarily rising because of the debt ceiling, however, said Matt Smith, an analyst with Summit Energy.

"It's a bit of position-taking to start the week," he said, noting some technical support around $4.20.

High nuclear capacity and moderating weather forecasts are also weighing on the market, Smith said.

Hot weather supportive of natural gas demand is still forecast for this week, but isn't as widespread.

"The southern sections of the Central U.S. could see one of its hottest weeks ever with frequent records set in Texas, the Southern Plains, and nearby areas of the Deep South," Commodity Weather Group said.

The private forecaster said more heat is expected in the Midwest and East this week and in the six- to 15-day forecast, but it won't be as intense as heat seen in recent weeks.

Demand for natural gas tends to fluctuate in the summer as the fuel is used to help generate electricity to power air conditioning.

Moderating temperatures and the growing supply of natural gas will continue to "plague" the market, Kilduff Group energy analyst Mike Fitzpatrick said in a note to clients.

"Look for the slide to continue once details of the agreement in Washington are fully parsed," Fitzpatrick wrote.

With the start of August, traders are continuing to monitor reports of tropical activity. Tropical Storm Don limited some production of natural gas in the Gulf of Mexico, but most production is onshore and wasn't affected by the storm.

A weather system 300 miles east of Martinique could become a tropical depression later Monday and has a 90% chance of becoming a tropical cyclone in the next 48 hours, the National Hurricane Center said. The storm could reach the Bahamas late this week, posing a low threat to the Gulf of Mexico, Commodity Weather Group said.

Natural gas for next-day delivery at the benchmark Henry Hub in Louisiana recently traded at $4.3025/MMBtu, according to the IntercontinentalExchange, up about 4 cents from Friday's average. Natural gas for Tuesday delivery at Transcontinental Zone 6 in New York traded at $4.9000/MMBtu, up about 5 cents from Friday's average.



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