NEW YORK: US spot natural gas prices edged higher on Monday on forecasts of cooler weather for the Midwest and South later this week, but lagging cash quotes relative to futures raised prospects that the physical market may finally be loosening up.
It was the first time in six sessions that cash prices gained.
"Prices were up, but the market feels weak relative to paper (futures). Cash has traded above the (NYMEX) screen for most of this year, but it's starting to fall behind," a Houston trader said, noting demand should get a boost later this week when Texas overnight low temperatures drop into the 40s Fahrenheit, or about 20 degrees below normal.
Gas for Tuesday delivery at Henry Hub <NG-W-HH>, the benchmark supply point in Louisiana, climbed 12 cents to $4.28 per million British thermal units, but late-morning Hub differentials weakened to about 6 cents under front-month futures from a 3-cent discount on Friday.
The daily Hub average, which hit a 21-month high of $4.429 on April 18, is above the April monthly index of $3.98 and more than double the year-ago price of $2.10.
Day-ahead prices on the Transco pipeline at the New York citygate <NG-NYCZ6> gained 17 cents to $4.42 on the cool Tuesday outlook, while Chicago <NG-CHGC>, another key gas-consuming market, was 13 cents higher at $4.29.
Chilly late-winter weather triggered strong draws from inventory and helped pull record high stocks at the beginning of the heating season down to below-average levels by late March.
Cash prices have also drawn support this year from above-average nuclear plant outages that have led to more gas burn. Gas-fired units are typically used to offset shut nuclear generation during periods of high demand.
But as temperatures moderate, many traders expect prices to struggle, at least until warmer weather stirs more cooling load.
While Commodity Weather Group expects the Midwest and South to cool again later this week, the forecaster said the East Coast should continue to see low demand, with no significant warming or cooling loads expected for the next two weeks.
<Center><b><i>Copyright Reuters, 2013</b></i><br></center>
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