A source’s prediction the day before of a potential price “bloodbath” in trading for the long Thanksgiving Day weekend (see Daily GPI, Nov. 21) came true in spades Wednesday. The market’s hemorrhaging was severe, as plunges of around 70 cents or more were common in all regions despite a mostly flat screen, and the OFO-devastated Southern California border dropped about a dollar.
Calling it a “crash in cash,” an arguably poetic marketer said the market got really ugly “even with everybody expecting it. I think prices got beat up even more than most people anticipated.” Henry Hub started in the $2.10s but got down to the upper $1.60s, leaving it trailing the December futures contract by more than a dollar in late deals, he said. “It [Hub] got about a dime bounce in the middle, from the $1.80s back up to the $1.90s, then kept going down again.”
However, a substantial rebound appears to be in store following the weekend, since the marketer reported Henry Hub balance-of-month swaps trading at $2.50, adding, “That means at least a few people are expecting this market to regain a lot of strength.” He noted that while the National Weather Service previously had been predicting above normal temperatures for all of the U.S. east of the Mississippi River through early this week, Wednesday’s six-to-10-day forecast for the period starting today narrowed the above normal band considerably to the Southeast from the Mid-Atlantic through a narrow sliver of the Texas Gulf Coast.
A trader of Midwestern citygates saw another reason for a post-weekend rally. Following Wednesday’s tremendous dips, “cash has a lot of converging to do with Nymex” this week, he said.
But AGA may have thrown a monkey wrench into the rebound machinery with its weekly storage report, issued not only well after cash activity had concluded but also after many traders had headed home early for the holiday. The association said 15 Bcf had been injected during the previous week, comfortably exceeding earlier expectations of a net volume slightly to either side of zero. And as if that wasn’t enough to give bears extra ammunition (a frightening thought for hunters!) for the upcoming week, AGA also said it was revising the week-earlier injection figure for the Consuming Region East upward by 10 Bcf.
Even a Gulf Coast producer was somewhat uncharacteristically bearish, saying he couldn’t see a lot of price strength returning this week. “Without weather, it’s going to be more of the same.” He added that traders wanted to make deals quickly and then get out Wednesday. Very few end-users were involved, he said. “It was mostly just marketing companies” swapping gas back and forth.
The weather was staying a bit chilly in the Northeast, so demand there hadn’t died totally Wednesday, a regional trader said. However, citygate numbers in the $2.00s and $2.10s represented “quite a comedown from $3-plus pricing Tuesday,” he observed. In the Midwest, where a warming trend was already under way, Chicago-area utilities were in a selling mode, according to a marketer.
Western numbers, which one source had thought might hold up more strongly than the overall market since next week’s temperatures are expected to be below normal, got socked with a one-two punch from high-linepack OFOs issued by SoCalGas and PG&E. A PG&E citygate trader said that with the OFO’s zero tolerance for positive imbalances, “it makes sense to go negative” (that is, nominate a little more than you actually intend to flow on PG&E).
Intra-Alberta pricing ignored its usual tendency to track the screen closely, which would have kept it only mildly softer, and instead reflected the overall market with a plunge of about C80 cents, one trader noted.
Continuing a pattern from earlier in the week, pricing got quite messy for many traders because of the high level of volatility. A marketer reporting an earlier Transco Station 30 deal at $2.00 ruefully reported a subsequent one at the point for $1.30. “Yes, I said $1.30. I got caught late and was hurt bad in having to make that sale,” he said.
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