The cash market finally found the burden of struggling higher with little visible means of fundamental support too much to bear Thursday, resulting in across-the-board retreats ranging from about a nickel to a little more than 15 cents.
But the denizens of the Nymex pits, who had received much of the credit for cash advances earlier in the week, showed they still had a few surprises up their sleeves. Despite an Energy Information Administration announcement of 75 Bcf in storage injections last week — which was both near the high end of prior expectations and represented a significant comedown from a string of September reports around 100 Bcf — November natural gas futures soared by nearly 35 cents to $5.494.
That wasn’t the Merc’s only awesome performance. The crude oil, heating oil and unleaded gasoline contracts also headed for the stratosphere as what appeared to be a semi-panic about winter heating fuel supplies set in. Short-covering was rampant throughout the energy futures complex, news reports said, boosting crude by more than a dollar to settle at a penny over the $31/bbl threshold.
Some were puzzled by the rapid about-face in oil prices, especially since industry reports the day before had indicated large gains in stockpiled inventory.
No matter which way trader thinking was going, the gas screen got caught up in the overall energy futures spikes. The question was, would that strength be reflected by a rebound in Friday’s cash market, where weather-related demand was expected to remain weak through the weekend?
Although trader sentiment seemed to lean slightly toward expecting a small rally, the reality would be iffy, a marketer said. Although parts of the East are due to get cooler next week, most of that won’t happen until after midweek, he said. And although it might not happen immediately, he thinks the filling of storage accounts will eventually put a major dent in cash bullishness before the end of the month. After all, those storage field compressors are having to work a lot harder now to stash an Mcf than they did last spring, the marketer noted.
Although it didn’t appear to be much of a factor in Thursday’s market, a large tropical wave in the eastern Caribbean was bringing lots of rain to the northern Lesser Antilles. The Weather 2000 consulting firm believes the system was “on the verge of becoming” Tropical Depression 18. If it got stronger after that, Tropical Storm Mindy would be born.
In a Thursday advisory, New York City-based Weather 2000 also offered further encouragement to bullish types. Current Indian Summer conditions in most of the U.S. are just a reprieve before a return to colder weather, it said. “Our comparisons of the 2003-2004 winter season being as cold as last winter (2002-2003), but in a different way, may have seemed statistically improbable, or even impossible based on government and other forecasters’ very warm autumn (October-December) projections. And considering the balmy weather many Midwest and Northeast locations are experiencing this week, a bearish attitude toward the fall and winter can easily arise.
“However, it’s always a good idea to look back where we’ve been before we look ahead to where we’re going. Last October New York City accumulated a meager three Heating Degree Days [HDD] through the first week of the month, while this year we already have a whopping 85 HDDs. Considering more cold waves are in store for the central and eastern U.S., reinforced and lengthened by emerging blocking patterns, it is possible that hubs like Chicago, Cincinnati and New York City (and several in between and [in the] South) could be approaching an incredible top-15 or even top-10 coldest (HDD) October, when all is said and done.”
Commenting on much talk about how far production-area cash prices, especially at Henry Hub, have trailed the screen in recent weeks, a Northeast marketer noted that following some narrowing of the gap on Wednesday, Thursday’s Nymex spike combined with the cash retreat “put a lot more space in an already wide Hub-screen spread.”
Rockies softness was rather mild considering how an outage at Trailblazer’s Station 602 (see Transportation Notes) is constricting transport of that market’s supplies to the Midcontinent/Midwest, one source observed. That negative factor may have been partially offset by a cold front moving into the Pacific Northwest, he added.
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