Daily GPI / NGI All News Access

Aftermarket Starts With Dime Slides Below Indexes

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 said.

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.

©Copyright 1999 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.

Copyright ©2018 Natural Gas Intelligence - All Rights Reserved.
ISSN © 2577-9877 | ISSN © 1532-1231
Comments powered by Disqus