Futures Higher Before, After Bullish Storage Data
After slipping 2.5 cents Tuesday, the May natural gas futures
contract climbed back up to just below stubborn support at $2.19
yesterday in tenuous trading ahead of the release of the American
Gas Association (AGA) storage report. May finished the session up 3
cents to $2.174.
Sources polled by NGI Wednesday pointed to increasing concerns
that lower production and deliverability levels will create a
supply-demand imbalance in bull traders' favor in the weeks and
months to come. "There are some people who feel that production is
off 3-5% in the last 12 months and I think we are starting to see
it, not only in the price, but also in storage injection figures.
There is just not as much gas available as there was a year ago,"
And if the latest supply data handed down from the AGA Wednesday
afternoon was any indication, he may be right. In their weekly
report, the AGA estimated only a net 2 Bcf was injected into the
ground last week. That figure pales, not only compared to market
expectations in the 20-40 Bcf range, but also to last year's 54 Bcf
injection figure. The often-quoted year-on-year surplus now sits at
234 Bcf, down from the 286 level of a week ago.
By 6:40 p.m. EST last night the storage report already was being
factored into prices as the May contract muscled an additional 2.9
cents higher to $2.203.
However, a Gulf trader believes a decrease in potential supply
is not the only factor pointing to additional gains. He targets
strong cash prices and heavy long positions held by fund traders as
indications the market still has room to trend higher. "Funds don't
typically ride a price move for 10 or 20 cents. No, they are in it
for the 40- or 60-cent move. And because they have only been on the
long side of the market since last bidweek, I'd say there is still
some upside left in this thing." Additionally he feels that a
bullish bias has already been embedded into nearby cash prices.
"May basis has tightened considerably in the Gulf. Historically
Columbia Gulf trades about 3.5 cents off futures, but that has
shrunk to just 2 cents recently," he said.
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