April natural gas managed a small gain Tuesday in volatile trading. Petroleum markets, however, continued to plummet as concerns mounted over the deepening crisis in Japan and a substantial hit to the world's third largest economy. Natural gas prices managed to rise as traders noted the relative appeal of gas compared to deteriorating equity and other petroleum markets. At the close April natural gas had risen 2.7 cents to $3.941 and May closed 3.6 cents higher at $4.012. April crude oil plunged $4.01 to $97.18/bbl.
Difficulties continued Tuesday at the quake-damaged Fukushima Daiichi nuclear plant. After three explosions and a fire in four days, the situation at the plant grew more serious, chasing all but a handful of workers from the site and raising fears of a far more dangerous radiation threat. In areas ravaged by the quake survivors huddled in cramped shelters with temperatures forecast to drop below freezing by Wednesday. More than 2,700 casualties have been recorded from the earthquake and tsunami. Tokyo stock markets suffered a second day of double-digit percentage losses.
Natural gas prices in New York gyrated and prompted traders to speculate on the likelihood of further upside. "This has been an interesting day. I haven't seen the market move like this in a while," said a New York floor trader.
"We traded down to 10 cents under Monday's close to 10 cents over and the spreads have been moving around as well. I would think there would be some large stop-loss orders above yesterday's [Monday's] high [$4.053], and I think some shorts jumped in over the last day and a half. I think you are looking at those levels for some stops," he said.
"I thought Monday the way the market headed down so quickly after it shot to its high that it would stay down and test the $3.50 to $3.60 area one more time, but we have been trading in this $3.75 to $4.05 range and until we break out of it, traders will be inclined to play the range.
"Maybe some money is coming into commodities such as natural gas. I know the stock market is down." The Dow Jones Industrial Average fell 137 points to 11,885.
"This market hasn't been able to pick its head up and put together a sustained rally for two years, but if we can get the market to settle above that $4.05 area, I think we can see some fireworks and trade up to $4.35," the trader said.
Analysts continue to mull the impact of the Japan tragedy and it's broader effect on U.S. natural gas. "The earthquake could help open the U.S. market for the longer-term by sparking a need for LNG export installations," said Peter Beutel of Cameron Hanover. He offered the caveat that "at some point, the lack of existing infrastructure has to exempt U.S. prices from additional Japanese influence. The earthquake story is compelling enough to boost quotes over the near term, but we do not see it as a major long-term factor every day. Nonetheless, it could act to prevent prices from falling below a certain minimum level for an extended period of time; prices just will not be sold dramatically lower on a whim any more."
Other analysts see a natural gas market response in the form of increased drilling and production. "Although LNG imports will likely be deterred over the longer term, it is also possible that the nuclear events in Japan will be encouraging efforts toward horizontal drilling activities that will keep natural gas production elevated comfortably above year-ago levels going forward," said Jim Ritterbusch of Ritterbusch and Associates. In his view, Monday's early price spike above $4 and subsequent retreat reflect this dynamic. "It would also tend to support our expectation for price gravitation at around the $4 mark per nearby futures throughout much of the upcoming shoulder period," he said.
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