Price Rises Likely to Get Steeper After Screen Explosion

Even with much of its cold weather support disappearing, the cash market still found cause for moderate bullishness Wednesday. But that's expected to pale in comparison to the fireworks that sources were predicting for today after the screen exploded with gains of more than 35 cents in both the November and December contracts following AGA's below-expectations storage report.

A futures increase in the vicinity of a dime during morning cash trading helped make up for a general warming trend in most regions except for the mountainous areas of the West, where winter storm watches were posted at some points. Gains between a nickel and a dime were prevalent in most markets, but prices were closer to flat in Northern California and at a few Northeast citygates. The only significant decline of almost a dime occurred at the Southern California border.

Most traders were expecting a storage figure close to last week's 78 Bcf injection, but AGA stunned them Wednesday with a report of 62 Bcf. The folks at Nymex promptly sent November and December futures skyrocketing more than a quarter higher beyond the morning dime gain. The extremely bullish reaction no doubt was supplemented by PIRA Energy Group's forecast of a 7 Bcf injection report next week (see Daily GPI, Oct. 11), one source said.

"With the screen up nearly 40 cents this afternoon, you have to assume cash is going to follow it at least part-way Thursday," according to a marketer. "People must be getting worried about storage again." A Gulf Coast producer was more specific, saying he expects Henry Hub to trade today about a nickel less than Wednesday's screen settlement, or in the mid $5.40s. That would represent a Hub jump of about 30 cents.

The rush of storage and futures news prompted a Calgary trader to remark, "People are getting both excited and nervous about what might happen this coming winter. One thing's for sure: prices will be hypervolatile. But what if the supply system fails, causing a huge political stink?"

Stanfield and Sumas continued to derive strength from the TransCanada-British Columbia constraints being extended once more (see Transportation Notes), noted a marketer, but they should start softening today, which is when the work is expected to be completed.

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