18 January 2010 22:51 [Source: ICIS news]
HOUSTON (ICIS news)--Indications that US industrial demand for natural gas was picking up were being offset by a jump in domestic gas production, and that was keeping a lid on prices, UK investment bank Barclays Capital said on Monday.
"Beyond this winter, markets will need supply and demand to cooperate in order to price higher," Barclays analysts said in a commentary.
US industrial production data issued by the Federal Reserve on Friday showed December output rose 0.6% from November, mainly because of an increase of 5.9% at electric and gas utilities due to unseasonably cold weather.
The data set "tends to provide good indications for industrial gas demand," the Barclays commentary said.
But on the supply side, local natural gas producers continue to add rigs to field operations, the commentary noted.
Another 30 rigs were added in the latest week, on top of 22 the week before, to take the total count to 811, it said.
"High prices encourage more supply, and the hasty start to 2010 suggests that many producers are intent on keeping to New Year's resolutions on production growth," the analysts said.
US natural gas prices dipped to a seven-year low below $3/MMBtu in August as economic activity slumped, and although values have since risen they have not kept up in relative terms with the appreciation of oil prices.
Front-month US gas futures closed 10.3 cents higher at $5.691/MMBtu on Friday. US markets were closed on Monday for a public holiday.
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