Natural gas futures surged to new 24-month highs for the third straight session Friday as traders bid up prices in a feeding frenzy after the trading floor of Nymex shook for nearly 10 seconds that morning when a barge carrying gasoline exploded in New York Harbor.
The fire was contained within two hours, but the psychological effect on traders was indelible as prices rose throughout the rest of the session. The March contract received the biggest buying boost, advancing 44.4 cents to close at $6.606. At 126,282, estimated volume was extremely heavy for a Friday.
“We shook for six or seven seconds,” said local trader Eric Bolling, who was in the natural gas trading pit at 10:10 a.m. EST when the explosion occurred. “I turned to the guy next to me to ask if he felt it too…..At first the concern was that it was terrorist-related, but CNN was showing footage of the fire less than two minutes later.”
One person was killed, one critically injured and another was missing following the explosion, which was deemed a “refueling accident” at the Port Mobil fuel storage complex on Staten Island. The barge was unloading 4 million gallons of unleaded gasoline. None of the complex’s 31 above-ground tanks caught fire.
Bolling went on to explain that the natural gas prices reacted to the news almost instantaneously. “We rocketed right up to $6.70. I know because I was short and there were no sellers. Everyone was a buyer.” As one might expect, the rest of the hydrocarbon complex also rallied. April crude advanced 84 cents to settle at $35.58/bbl. March heating oil added nearly a nickel to close just shy of $1.11/gallon.
Even without an explosion, Fridays have been big days in the natural gas pit of late as traders have bid up the market in a delayed reaction to the string of bullish storage numbers released on Thursday mornings. Following weekly storage withdrawals of 208 Bcf, 150 Bcf and 203 Bcf on the last three Thursdays, the prompt month natural gas contract has advanced 21.5 cents, 11.1 cents and 44.4 cents on the last three Fridays.
And as it has for much of this winter, bullish storage has once again aligned with supportive weather forecasts. According to the latest six- to 10-day forecast released Friday by the National Weather Service, below-normal temperatures are predicted for New England and eastern New York through the end of February. Also expected to see cooler than usual temperatures during that timeframe is the western U.S. from Washington to West Texas.
For Bolling, however, it is the synchronization of fundamentals and technicals that have put prices into orbit. “Everything is lined up in bullish agreement, and fund buyers continued to press through trade and commercial attempts to pick a top. It seems that not a day goes by that somebody doesn’t tell me that resistance will hold and prices have topped. They said it at $4.25, and then again at $5.53. Then [Thursday] they said prices would not get past $6.20…. Each time people have tried to pick a top and each time the funds have pushed right through.”
According to the latest Commitments of Traders Report released Friday by the Commodity Futures Trading Commission, non-commercial traders (funds) were net long 24,240 positions. And while it is possible that these fund traders could reverse and liquidate their longs at the drop of a hat, Bolling believes that their slow, methodical accumulation of long positions reasons against it. “They are so in the money right now that they can take a fair amount of pain to the downside without having their [sell] stops triggered. Normally, you would see them use a sell stop that is fairly close to the market in an effort to minimize their loss should the market turn. But they have been long for a while and have seen the market rebound after each sell-off….Their patience has paid off,” he reasoned.
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