Short Covering, Big Withdrawal Help Buoy Cash Prices
"Dead" was the popular word used by traders to describe the
stagnant cash market Thursday, where prices showed very little, if
any, change from the prior day. Most sources believe that short
covering is the main factor helping cash maintain current price
levels amid the lack of any meaningful fundamental support.
"The market is pretty much being held up" because most market
players didn't buy much baseload gas at the beginning of the month
and they're getting caught right now trying to cover their
positions, said one marketer. "We're getting close to the end of
the withdrawal season, so storage deliverability is lower. These
[shorts] can't pull out of storage as hard, and they have to buy on
the spot market." He expects the latter scenario to continue
through the end of the month, keeping cash relatively stable
despite the lack of fundamental support. "We have no weather, and
we have huge storage inventories. This means the cash market has no
reason to spike with the exception of support from these shorts."
Another marketer, however, said the AGA storage report this week
provided some help in preventing a price collapse, despite the
lingering 355 Bcf storage surplus compared to the same time last
year. The report showed the highest withdrawal for any week since
January and almost double the previous week, he noted.
Chicago prices started in the upper $1.70s, but after a push
toward the $1.80 level, they turned back, according to one
Chicago-based buyer. Late bids at the citygate were seen in the low
$1.70s, he added. "Chicago prices could continue to lose ground for
the rest of the month, but there seems to be good buying support
when prices dip into the middle $1.60s."
The Rockies market was largely flat for the conclusion of the
day, according to an area trader. "In some cases, we paid higher
prices [Wednesday] than we did [Thursday]," he added. The trader
said that Questar declared an Operational Flow Order (OFO) due to
high inventories on the system. "It is 65 degrees out here and
there's too much gas that can't find a home."
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