Despite the possibility that the first Atlantic tropical storm of the season could be identified over the weekend, natural gas futures on Friday actually settled lower. After trading in positive territory for a vast majority of the day, July natural gas futures slumped lower late Friday to close at $6.172, down 1.9 cents on the day and 45.1 cents lower than the previous week’s close.
After recording a high of $6.400 in morning trade, July natural gas worked its way lower for the rest of the session, hitting a low of $6.160 before settling for the week. The fact that a tropical disturbance in the Gulf of Honduras could be identified as Tropical Storm Alberto over the weekend did not seem to faze traders in the pits at all.
“The news out there Friday was that there is a storm in the Caribbean that could become a problem,” said Steve Blair, a broker with Rafferty Technical Research in New York. “Forecasters are saying it could turn into a either a tropical depression or tropical storm if it gets into the Gulf. Right now, they don’t know where it is going to go after it brushes the Yucatan Peninsula. However, it doesn’t seem like natural gas traders paid much attention to it. If they really thought the storm could become a potential problem, the natural gas market would have been up 40-50 cents on the day.”
The broker added that the real news Friday was in the crude pit, where crude pushed even further above $70/bbl. After notching a high of $71.80/bbl, July crude closed Friday at $71.63/bbl.
“On Thursday the petroleum complex got hammered on news of the death of terrorist Abu Musab al-Zarqawi and on Friday we bounced back with a vengeance. I don’t know if it was people covering up Friday or if people were resetting their longs. I know it was not in response to the tropical disturbance, because natural gas futures would have been significantly higher as well.”
Analysts see two paths for the natural gas market as storage rapidly fills during the summer. One path holds that prices will implode to the point where they will be low enough to soak up the surplus. Several analysts have suggested that the $5 to $5.50/MMBtu price range is the place at which natural gas could displace coal as a fuel for electrical generation. The other avenue is that “pipeline pressure buildups or curtailments of production are a more likely outcome if hurricanes don’t knock out substantial supplies from the Gulf of Mexico as they did the past two years,” said Paul Flemming, a natural gas analyst at Energy Security Analysis Inc.
On a different note, traders Thursday voiced apprehension of the implementation of side-by-side trading, and indicated that part of Thursday’s advance was due not only to a slightly lower injection, 77 Bcf vs. an expected mid 80s Bcf, but also to traders covering short positions ahead of the Sunday/Monday implementation of the new trading format (see related story).
On the weather front, the bulls might have to wait a little longer to take advantage of summer heat blanketing the country. Looking at the National Weather Service’s latest six-to-10-day outlook covering June 14-18, a large portion of the center of the country is expected to experience above normal and normal temperatures while the West Coast and the populous Mid-Atlantic and Northeast regions are expected to slide through with below normal conditions. The Southeast is expected to see normal temperatures during that time.
The country is not a lot warmer in the NWS’ eight-to-14-day forecast, which covers June 16-22. A large portion of the West and the East Coast is expected to experience below normal temperatures, while the middle of the country remains normal to above normal and the Northeast experiences seasonal temperatures.
©Copyright 2006Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.
© 2020 Natural Gas Intelligence. All rights reserved.
ISSN © 1532-1231 | ISSN © 2577-9877 |