With Hurricane Wilma firmly in the rear view mirror with no harm to Gulf of Mexico oil and gas infrastructure, November natural gas on Monday failed to push lower, leading some to believe the premium built into the market might already have been taken out. The prompt month ended up settling at $13.004, 13.2 cents higher on the day.
After testing support with a morning low of $12.765, November natural gas ended up seesawing for the remainder of the session. The contract ended up hitting a high of $13.09 before dropping a few cents to settle.
With November expiring on Thursday, more focus has been put on the December contract as well as the rest of the winter months. While December on Monday gained a penny to close at $13.177, January and February dropped 1.9 cents and 2.4 cents, respectively, to settle at $13.535 and $13.460.
As the winter heating season comes front and center to the industry’s attention, questions about the last hurrah of the 2005 hurricane season, winter weather forecasts and the natural gas storage situation remain hot topics.
As Hurricane Wilma is no longer a threat to Gulf production facilities, attention has turned to the remainder of the 2005 Atlantic hurricane season, which ends at the end of November. What was once Tropical Storm Alpha has been downgraded to a tropical depression, the National Hurricane Center said, noting that Alpha is expected to completely dissipate after Hurricane Wilma absorbs it in the next 24 hours.
Just as hurricanes lose some of their market impact, temperature forecasts may help support prices this week. AccuWeather predicts that for this week a vast area of the country east of a line from northern Wisconsin to eastern New Mexico will experience below normal temperatures. The Rocky Mountains and interior West will be above normal and California and the West Coast normal.
Looking longer term, WSI Corp.’s November-January forecast is looking for mostly warmer than normal temps (see related story), which analysts note could help the storage fill season extend longer than normal. However, some market experts warn the current level of natural gas inventories may be misleading.
Although natural gas inventories stand at a robust 3,062 Bcf it should not be confused with adequate winter supply. The unexpectedly large injection of 75 Bcf “is probably due to the fact that many refineries and petrochemical plants are still off line and therefore not using any natural gas,” suggests Phil Flynn, of Alaron, Chicago. Flynn points out that most natural gas usage does not come out of storage but is delivered right from the ground to the pipeline. “The storage is available when winter demand exceeds current production supply, and unless natural gas output in the Gulf of Mexico gets back to normal before the first blast of sustained cold we may find three trillion cubic feet isn’t quite what it seems,” he said.
Friday the Commodity Futures Trading Commission released figures on the holdings of noncommercials, typically large pools of speculative capital, and they are anticipating a decline in prices. The Commitments of Traders report showed that as of October 18, noncommercials held a net short 24,055 (futures only) contracts. This is an increase from the 17,448 net short contracts held just a week earlier.
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