Bulls Have Final Say at Nymex in 2000

After watching prices gyrate wildly for the last several months, traders were looking forward to a nice, quiet, last trading session of the year Friday at Nymex. After all, who would want to propel prices dramatically higher or lower in an abbreviated trading session just before the holidays? As a result, prices would probably just chop lazily sideways, allowing traders the time to catch up on paperwork, right?

Wrong.

In a fitting end to a year in which prices nearly quintupled, natural gas futures rocketed more than 5% higher Friday as traders learned not only of a nor'easter bearing down on New England, but also of a compressor station explosion late Thursday near the New Hampshire-Quebec border. The February contract received the largest boost, spiraling 51.2 cents higher to close at $9.775. Nearly as impressive were the out months, which contributed to the price rise that enabled the 12-month strip to gain 18.6 cents to $6.129.

Although the outage resulting from the explosion that tore apart TransQuebec & Maritimes Pipeline's East Hereford, QB compressor station will only reduce flows by up to 20 MMcf/d, several traders said that it had a huge psychological impact on prices yesterday morning. By 11:00 a.m. (ET), the February contract had notched a new contract high at $9.93.

Also of impact Friday were forecasts calling for more than a foot of snow on Saturday in the major population centers of Philadelphia, New York and Boston. Physical prices reacted accordingly with Transco Zone 6-New York climbing more than $4 to surpass $25.00.

Looking ahead, Susannah Hardesty of Indiana-based Energy Research and Trading believes there is no significant sign of topping action yet, and prices should continue to move higher. Culminating in what she calls an "Arctic High," Hardesty looks for the February contract to probe higher to test expected resistance in the $11.00-13.00 range between now and the middle of January. "Should prices finally peak at the upper end of this range, or at an even later time, it will impact the ability of the market to move as low as I have projected for the Winter Low, and those levels will have to be raised." Currently, she estimates that the Winter Lows will occur in the first quarter of 2001 on a move to the $4.30 to $5.75 area.

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