Storm Concerns Run Futures to Fresh Highs Ahead of AGA
Mark Twain once said that while everybody talks about the weather, nobody does anything about it. And although that may have held true on a 19th century Mississippi Riverboat, it was not the case in the natural trading pit Tuesday as traders bid up prices throughout the session on the news two new tropical systems had formed in the Gulf of Mexico and Caribbean Sea.
The October contract finished up 6.8 cents at $5.363, and in doing so set a new prompt month high at $5.385. Led by the December contract, the winter strip was equally impressive, probing 8.5 cents higher to close at $5.268.
The most conspicuous feature of yesterday's trading was the fact that futures prices received a boost at 10 minutes before each hour throughout the session, leading Ed Kennedy of Miami-based Pioneer Futures to conclude traders were glued to the Weather Channel. "We saw additional buying enter the market at the bottom of each hour. It was clear that people were waiting for the revised forecast and reacting accordingly."
As of press time last night, the National Hurricane Center was sending Hurricane Hunter reconnaissance aircraft to evaluate an area of unsettled weather in the Southwest Gulf as well as the remnants of tropical depression 12 in the Western Caribbean Sea. Both systems have the potential to strengthen, the NHC said.
According to Kennedy, the existence of this double-barrel threat has got sellers frozen in the headlights. However, he admits that the buying seen in the market today was cautious ---probably because traders are weary of achieving fresh length at the market's already lofty price level and also ahead of today's storage report.
Looking ahead, traders expect to see an injection of somewhere between 60-70 Bcf when the AGA releases its updated report at 2:00 p.m. (EDT). Anything less would be bullish, while anything greater would be bearish, sources agree.
Ironically, last week at this time the conditions were similar. The market had just learned of the potential formation of a new storm, and expectations were centered on a 50-60 Bcf injection. Prices moved higher throughout the session last Wednesday (see Daily GPI, Sept. 14) before plummeting when the AGA announced that a whopping 72 Bcf had been stuffed into the ground. That bearish sentiment did not last too long, however, and prices finished on a strong note amid continued storm concerns.
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