Posted on 01/01/2004 9:25:49 AM PST by BOBTHENAILER
Natural-gas futures up 29% for '03 Crude up 4% for the year; cattle down 20% in 5 sessions
By Myra P. Saefong, CBS.MarketWatch.com Last Update: 3:53 PM ET Dec. 31, 2003
SAN FRANCISCO (CBS.MW) -- Even after suffering a drop of as much as 18 percent in the last three weeks, natural-gas futures ended the year with a 29 percent gain.
CBS MARKETWATCH TOP NEWS Rambus ends higher again; chip index up 76% for '03 For fund investors, a memorable year ADRs end best year since 1999, up 33% U.S. stocks end 2003 with first gain in four years Cattle futures tally five-session loss of nearly 20%
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The hefty year-over-year price climb "only reinforces the fact that pent-up demand continues to climb," said Kevin Kerr, a senior trading director at KWEST Trading International.
February natural gas closed at $6.189 per million British thermal units on the New York Mercantile Exchange, down 41.1 cents for the session. That's a steep drop from the high of $7.55 reached on Dec. 10.
But prices are still significantly up from the year-ago close of $4.789.
"Natural gas is simply becoming the fuel of choice for consumers and industry and that is why this contract is exploding as the alternative to other alternatives," Kerr said.
"If we see another year like last year in the gas, it will be trading over $10 on a regular basis," he added.
Agbeli Ameko, a managing partner at Enercast Inc., an energy-forecasting firm based in Denver, also attributed the strength in the heating fuel to higher demand.
"This year represents the first year of the economic recovery," he said. "Higher natural gas demand is going to be a concern until production fills this gap."
Near-term volatility
On Wednesday, natural-gas futures dropped 6 percent after the Energy Department said U.S. natural-gas inventories fell by only 80 billion cubic feet for the week ended Dec. 26.
The report was released a day earlier because of the New Year's holiday on Thursday. Energy trading on Nymex closed early Wednesday and won't reopen until Monday.
Enercast expected a 146 billion-cubic-foot fall in stocks. Fimat USA analysts expected a drop of 122 billion cubic feet.
Total stocks now stand at 2.619 trillion cubic feet, up 202 billion cubic feet from the year-ago level, and up 78 billion cubic feet from the five-year average, the government data said.
"Current storage remains adequate for a normal winter," Augustine Faucher, a senior economist at Economy.com, wrote in a weekly update released Wednesday. "Only if the winter turns out to be unusually severe should there be significant price spikes," he said.
Enercast's Ameko is looking for a 105 billion-cubic-foot fall in natural-gas stocks for the week ended Jan. 2. The Energy Department report covering that week will be released next Thursday.
"This gas market could see a sustained rally following the holiday season," said Ameko, noting that "the weather is setting up to be fairly cold."
"The real rally in this market will most likely occur in February as end of season storage draws near and continued cold air hangs around," he said.
Crude marks 4% gain for the year
Crude futures closed out the year with a modest 4 percent gain after a tumultuous year of Iraqi-news driven movements.
February crude closed at $32.52 per barrel, down 27 cents for the session. Earlier Wednesday, it touched an intraday high of $33.20 -- a level not seen since Dec. 19.
Futures prices are up by $1.32 per barrel from the year-ago close of $31.20. In contrast, they're also down around 19 percent from the pre-Iraqi war high of nearly $40 from February.
On Wednesday, petroleum futures prices fell as a climb in U.S. distillate supplies for the first time in three weeks offset a hefty decline crude inventories.
KWEST's Kerr attributed the session's price decline to traders who believe "supplies are adequate and this data must be flawed."
"Weather is the big factor and ... the Northeast is looking at unseasonably warm temps," he said.
Early Wednesday, the Energy Department reported a 3.8 million-barrel fall in crude stocks for the week ended Dec. 26, to total stocks of 270.7 million.
Inventories now stand 3.2 percent below the year-ago level, according to the government data. And crude stocks have now fallen in five of the past six weeks.
The American Petroleum Institute said crude supplies fell an even heftier 8.3 million barrels last week, to total 267.5 million barrels.
John Kilduff, an analyst at Fimat USA, expected crude inventories to be unchanged for the week ended Dec. 26. Kerr was looking for a buildup of 1.5 million to 2 million barrels.
Petroleum-product stocks climb
In the offset, however, supplies of petroleum products headed higher.
Distillate supplies climbed by 700,000 barrels in the latest week to 129.1 million barrels, the Energy Department said. Still, that's 2.3 percent below the year-ago level.
The API said stocks climbed 100,000 barrels to 130.8 million barrels.
"Heating-oil supplies should show a significant increase over the next few weeks, which in turn may soften crude prices, as well," said KWEST's Kerr.
Motor gasoline inventories rose by 600,000 barrels to 203.6 million barrels, or 2.4 percent below the year-ago level, according to the government data. Supplies were up 1.6 million at 202.8 million barrels, according to the API.
Kilduff expected supplies of distillates, which include heating oil and jet fuel, and unleaded gasoline to each show a fall of 500,000 barrels for the week.
But Kerr expected an increase of 1.5 million for distillates, and saw gasoline supplies as unchanged or up by as much as 1 million barrels for last week.
On Nymex Wednesday, heating oil for January delivery fell back by 1.67 cents to close at 91.27 cents a gallon. January unleaded gasoline fell 0.05 cent to end at 94.92 cents a gallon.
The February petroleum-product contracts became the lead-month contracts for the futures market at the session's close. February heating oil fell 1.81 cents to close at 91.46 cents a gallon. February unleaded gasoline closed at 93.29 cent a gallon, down 1.46 cents.
Traders keep sights on OPEC
In addition to assessing the data over the holiday, traders will be on the lookout for any hints from OPEC members on what they will decide to do about production levels at their next meeting on Feb. 10.
The average price for OPEC's basket of seven types of crude has been above its target range of $22 to $28 for 19 business days. As of Tuesday, it stood at $29.53 per barrel.
OPEC has an agreement in place to increase production if prices remain above the target range for 20 straight business days.
But "OPEC is not going to enact the automatic stabilizer production increase and continues to eye a cut on Feb. 10," said Joshua Sadler, an energy trader at Societe Generale's SG Corporate & Investment Banking unit, in a research note.
Over in the equities market, energy shares traded lower, as reflected by weakness in the Philadelphia Oil Service Index ($OSX: news, chart, profile). See Energy Stocks.
Cattle futures' loss near 20% in five sessions
On the Chicago Mercantile Exchange, cattle futures have now tallied a decline of nearly 20 percent over the past five sessions amid growing concerns over the impact the discovery of a mad-cow case in the U.S. will have to the billion-dollar industry. Read the full story.
Back on Nymex, gold futures closed lower for the session, but ended the year with a nearly 20 percent gain. See Metals Stocks.
Tracking the commodities sector as a whole, the Reuters/CRB Index shed 0.2 percent to 255.29.
Myra P. Saefong is a reporter for CBS.MarketWatch.com in San Francisco.
Hehehehehe.
Besides, if gas gets too expensive, alternative energy sources suddenly become profitable.
I could live with $7.50 gas quite nicely, I think.
But... Then, again... We must watch out for moral equivocations above all else, lest we become too arrogant and powerful and start our "Ugly American" gloating and greediness in our economic largess in feeding the world.
We must protect our image by professing guilt over our success in helping third whirled cuntries develop their resources so they can beat us evil capitalists over the head with guilt, right? (/super-sarcasm)
Of course, that would have meant that two people in the entire USA were watching PBS on New Years Eve.
The headline was mine, and you're right, I picked it to mock the DU trolls.
Agreed. Actually, I could easily live with a rock solid $4.00-$4.50, after transportation, gathering and marketing. Industry could as well. Then we all thrive.
Whine, moan, cry, weep. You are so right, we need to constantly self-flagellate for our wicked ways. </ mega-sarcasm >
Why... It almost brought tears to my eyes! Tears of pain and utter shame that now their damn "resource" would remain locked up in their Commonista inspired deposing of their US friendly El Presidente!!! Oh, the humanity!!! The enslavement!!! (gasping for breath)
Even the McLaughlin Group is getting "progressively" more and more disgusting, each time I watch it. Grampa Dave admonishes me not to watch it, but I've gotta know whut them "Mainstream Liburrals" are spinning out of current realitys!!!
The US could do well by building and converting more power plants to coal, which we have some 100 plus years of. Never happen though due to enviro-wackos.
CNG gas exports to the US are declining, due to two factors. More demand in Canada and rapidly declining production from monster fields such as Ladyfern.
I'm surprised to hear about the Canadian angle -- I would have thought that demand in the U.S. would always go higher relative to demand in Canada, simply because the U.S. population is growing faster than theirs.
I suspect that the decline in the value of the U.S. dollar relative to theirs is a major factor here, too. At a price of $10, this would translate to about $13 Canadian. A year and a half ago, this would have been about $15.50 Canadian.
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