Aftermarket Starts With Dime Slides Below Indexes
Any traders who decided that since April proved to be a good
month for long supply positions, they should continue the strategy
for May may be regretting that decision now. Though there is still
ample time for price recovery-and at least one major aggregator
remains very bullish about the May swing market-the early
aftermarket was headed south to the tune of about a dime or more
below indexes in weekend deals done Friday.
Most sources pointed at the June futures drop of nearly a dime
as the cause of the cash softness, but "there was just no market
demand," one noted. In addition, a couple of traders agreed that
some extra supplies were showing up that didn't appear to have been
available previously. One in Houston thought some people had held
back gas during bidweek in expectations of meeting incremental
demand that failed to materialize.
It was inevitable that some price retrenchment would set in
after the April day market was dominated by upticks, said the
aggregator's head of eastern trading Friday, but it's difficult to
anticipate that kind of reversal when all indicators say the market
outlook is all toward the upside. However, "that should be the
first clue that something is wrong when everybody is leaning in one
direction," he added.
Despite the weekend price softness, there's good reason to
expect May swing gas to recover to index levels or above, the
aggregator said. Recent AGA reports indicate a large bite has been
taken out of the year-on-year storage surplus, and because many
utilities are not yet into their regular injection schedules, he
expects incremental injections to be rising during May. Also, there
will be substantial electric utility buying with just normal
temperatures, and there will be much more if the South's air
conditioning load is high, as predicted for first week of May, he
How hard is it to make a bidweek strategy call on whether to
take a long or short supply stance? Sometimes it's hit or miss, the
trading chief said, "but we were positioned well in both situations
[April and May]." His company expected strong April demand because
of non-gas power plant outages and cooler than normal weather in
northern and western markets. "But we didn't expect well above
normal air conditioning load in the South, which made us 'righter'
than we thought."
Not only was Friday's swing trend lower, but some points started
out down and proceeded much further down from there. One source
quoted early Sumas deals in the high $1.80s, almost a dime under
his baseload numbers, then made his last two purchases of the day
at $1.80 and $1.75. And "nobody wanted San Juan [gas] today," said
a marketer who made his first Blanco pool deal at $1.90 only to
close out trading with a $1.70 purchase. He thought the threat of
an Overnominations Day OFO on the SoCal Gas system (none was
issued) scared off utility buyers in California.
Most May bidweek business had been completed by Friday, but the
screen weakness was affecting tail-end deals done that day. For
example, Malin traded on either side of $2.10 for much of the week,
but a marketer who picked up his last package for $2.05 late
Thursday afternoon said Friday he wished he had waited because
prices fell even further after that. Sure enough, another source
reported a Malin purchase at $2.02 Friday.
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