NEW YORK (Dow Jones)--Natural gas futures rose Tuesday as market participants bet on an expected seasonal rally on the October contract's last trading day.
Natural gas for October delivery settled 3.7 cents, or 1% higher, at $3.837 per million British thermal units on the New York Mercantile Exchange. The new front-month contract, for November delivery, rose 3.5 cents, or 0.9%, to $3.951/MMBtu.
Futures have staged multi-day rallies twice this month on the expectation of a seasonal rally, but each time pulled back amid high inventories and a lack of serious storm threats to offshore production.
Natural gas is "in no man's land," said Cameron Horwitz, an analyst with Canaccord Genuity. He said that because of the relatively low price of gas for this time of year, waves of bargain buying could lead to quick swings, but that the market lacked a definitive direction.
Traders have spent much of September weighing whether a typical seasonal rally is imminent or if abundant supply will continue to pressure prices lower. Natural gas prices historically reach a seasonal low point in August or September, before rising in anticipation of winter's gas-heating demand.
"Bottom line, you're in the low demand shoulder period," Horwitz said. "You don't really have anything to get excited about on the demand side."
The U.S. Energy Information Administration reported last week that inventories as of Sept. 17 were 6.2% above the five-year average.
"There's a tremendous amount of gas out there," said John Woods, president of JJ Woods Associates. "This market could still go lower."
Meanwhile, a cluster of storms in the northwest Caribbean Tuesday developed into a tropical depression, the National Hurricane Center said. The storm is widely seen moving toward Florida, a path that would miss the main U.S. gas production infrastructure in the Gulf of Mexico. Futures can spike if storms develop near the Gulf, which is home to about 11% of U.S. natural gas production
