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Shaky at Start, Futures Rumble Higher Amid Pre-AGA Hype

Shaky at Start, Futures Rumble Higher Amid Pre-AGA Hype

As cooling temperatures were giving heat ravaged areas from the Upper Midwest to the Southeast much needed relief, the natural gas futures market was doing its own cooling off early yesterday as prices dipped to the lowest level since July 23. The move lower was short-lived and after opening at $2.50 the August contract was unable to attract follow-though selling, leaving buyers to bid the market higher throughout the rest of the day. The prompt month finished up 3.2 cents at $2.575.

Several traders contacted by NGI were surprised by the market's ability to move higher in the face of cash prices that fell a nickel or more at most Gulf Coast trading locations. NGI's Henry Hub price for today is $2.51. However, a Dallas-based marketer was already looking toward the Wednesday afternoon release of the American Gas Association (AGA) storage report, and thought it was already having an influence on the market. "Last year we saw a refill of 70 Bcf, but this year we will be lucky to beat last week's 41 Bcf figure," she said.

And Raymond James & Associates of St. Petersburg, FL agrees and points to a the U.S average of 98 cooling degree days (CCD) for the week ending July 24th vs. the normal 85 CCD seen over time. "For that week, the AGA reported only 41 Bcf of gas injections vs. 66 Bcf for the same week last year," the group wrote in Stat of the Week released August 2. "That means that we could see a sub 40 Bcf gas storage injection number when the data is reported this Wednesday."

But pre-AGA hype was not limited to cash traders and financial consultants. A technician with New York-based Trot Trading Corporation was also quick to admit that it is a fundamental factor which cannot be overlooked. "Natural [gas] has found a nice little range between the mid-$2.40s and low-$2.60s, but the market could easily move above or below that level once the report is released," he speculated. In the meantime, he favors a move back to the upper end of that range as early as today.

As of 7:00 PM last night his prognostication appeared to be right on as buying spilled over into Access trading to propel the August contract 2.5 cents higher an even $2.60.

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