Seatbelts for natural gas futures traders should have been required once again on Friday, as the November contract copied its roller coaster-like movements from Thursday. Despite being as high as $14.35 in the afternoon, the prompt month ended up settling at $13.921, down 27.5 cents on the day but $1.234 higher than the contract’s previous week’s close.

After trading lower in the overnight Access trading session, November natural gas hit its $14.35 high just after noon EDT. After zig-zagging for the remainder of the session, the prompt month put in a $13.80 low in the afternoon before inching higher to close.

“This natural gas futures market is just unbelievable,” said Steve Blair of Rafferty Technical Research in New York. “We are obviously in a bullish market and we continue to have pretty wide swings during the day.”

The broker noted that trading on Friday was pretty quiet on the floor. “When I called down, there wasn’t really the loud commotion you normally hear,” he said. “I think the market was getting pushed around on low volume as traders were looking to take advantage of one of the last really nice weekends of the year. I really think some people made it a long weekend. Part of what happened Friday was probably a squaring up of positions going into the weekend.”

Blair said the interesting thing is the difference in the front-month spreads for both crude and natural gas. “Because the crude futures market has been comfortable with its supply situation, it has been contango for approximately the last year with gaps between the first month to the second month and so on. However, the last couple of days has seen the crude front spread go from a 50-cent contango to a 50-cent backwardation. That’s a dollar swing in a spread.”

Blair noted that he’s not seen the backwardation in the natural gas futures complex. “The natgas market has stayed mostly contango,” he said. “While we have most of the Gulf still shut in, the natural gas market hasn’t done what the crude market has done in the front month spread, indicating that the natural gas futures market is comfortable with what is in storage and isn’t too concerned with near-term supply.”

Blair said this brings up an important question. “If the market is so concerned about near-term supply, why is the front month so severely contango?” The spread between November and December natural gas futures was 51 cents at the end of the day Friday.

Blair said what makes the equation even more confusing is the fact that natural gas doesn’t have the “import safety net” that crude has. “Crude can come in from Iraq, Saudi Arabia or Venezuela, while natural gas doesn’t have any of the same avenues currently.”

The broker noted that while the natural gas futures market has seen at all-time record prices recently, the front-month spread has remained comfortable. “If the market was intensely concerned about near-term supplies, the front month would be collapsing on the next month and so on down the line. This isn’t happening. Does this mean that the market is comfortable in storage and not worried? Could be, but then why is the market at $14?”

Analysts studying natural gas supplies are encouraged that near-term weather may help boost inventories. “In the summertime, greater cooling degree days require more natural gas usage for electrical generation, but there is a breakpoint to that dynamic,” asserted Stephen Smith of Stephen Smith Energy, a Natchez, MS energy consulting firm. He said that on or about Sept. 23, being warmer than normal means less energy consumption because heating load has become more important by that time. “Power load is now being lost because of warmer-than-normal temperatures,” he said.

With heating degree days still mostly unseen, cooling degree days (CDD) are still coming in above normal. The National Weather Service forecasted 58 cooling degree days (CDD) for the week ended Oct. 2 — 13 more than normal — in the South Atlantic states of Florida, Georgia, the Carolinas, Virginia, and Maryland. For the East South Central states of Mississippi, Alabama, Kentucky, and Tennessee, 43 CDDs were forecast, again 13 more than normal.

For an industry looking to pack away as much gas as possible in preparation for the winter, that should be music to their ears.

“Natural gas load is also being lost to refineries and petrochemical plants that are off as well,” Smith said. “Put the numbers together and the experience is likely to be similar to that after Ivan where the weather was incredibly warm and severe price breaks took place. I am looking for ending inventories to be in the neighborhood of 3,180 Bcf.”

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