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Natural Gas Prices: Low Now, Lower Later?
14 Feb 2012 EST - CNBC.com
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Natural gas futures were higher Tuesday, but analysts caution the low for the year may be yet to come, as unusually warm temperatures and abundant supply keep the pressure on prices.

Some analysts believe natural gas could even fall below $2 per million BTUs before it heads higher.

Natural gas futures Tuesday were up more than 4 percent at $2.53 per million BTUs.

"It had mostly to do with short covering," said John Kilduff of Again Capital. "The weather's really moderate, and there's really nothing out there."

"The fundamentals remain bearish," said Gene McGillian, an analyst with Tradition Energy. He said cheap prices drew in a lot of new speculative longs in recent weeks.

"We've been pivoting for the last two weeks between a dime of $2.50," per million BTUs, McGillian said. But if the price starts to decline, some of those new longs might be the first to abandon the trade, driving prices down fast.

"I don't think a $1 handle would be sustained, but I think there's a good chance we could see it at some point," he said.

Natural gas prices, which fell to a decade low in January, have had a bit of a reprieve as some companies, like Chesapeake, announced they would cut back on drilling activity. "If you get more production shut ins, that would probably close a door on it," and natural gas could head higher, McGillian said.

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