For the first half of December, natural gas futures have been awhirlwind of volatility, where chart gaps and double-digit pricemoves have been almost the norm. So it came as a welcome change forsome when the prompt January contract exhibited a more sedatedemeanor Tuesday, trading within a narrow band and settlingunchanged for the day. Estimated volume was a relatively quiet50,593.
A source pointed to uncertainty about this afternoon’s AmericanGas Association storage report as a reason for the lack of priceaction. “After the last two storage reports buyers were a little[reluctant] to step in the market [Tuesday],” he said referring tothe unprecedented storage injection figures the market has beendealt the past two Wednesday’s. Early predictions for this week’sreport call for a net withdrawal of 20-80 Bcf, which pales incomparison to last year’s sizable 136 Bcf withdrawal. And iftoday’s withdrawal figure falls within that range of expectationsit would push the ballooning year-on-year surplus to more than 600Bcf.
But, “the fat lady has not sung” for 1999 gas prices, said J.Marshall Adkins of St. Petersburg-based Raymond James &Associates. “Given the much warmer than normal temperaturesexperienced during the second half of last winter, more normalizedtemperatures over the next three months should result in muchcloser winter-end storage levels,” Adkins contends. And while ashrinkage of the hefty 567 year-on-year storage surplus is not anextremely bullish gas price scenario, he looks low drilling ratesand high decline rates of supply to support 1999 gas prices in the$2.15-35 range.
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