Completing its quietest last-three-day settlement period inrecent history, natural gas futures moved higher early yesterdayonly to drift lower throughout the afternoon as traders lightenedtheir long exposures. The expiring May contract finished 2.1 centslower at $3.089, but for many the real story was the rest of thesummer strip which slipped an average of 2.9 cents. Estimatedvolume was light for an expiration day with only 90,843 contractschanging hands.

Sources polled by NGI were surprised by the scant 8.5-centtrading range that confined May during its last-three-daysettlement period. Some traders attributed the lack of volatilityto the large premium already embedded into prices, while otherschalked it up to “plain old shoulder month trading activity.”

However, a Houston-based risk manager took a different slant,noting a huge volume of Trading-At-Settle (TAS) deals Tuesday onthe May contract’s penultimate day. “We saw 8,534 contracts TAS[Tuesday] by big players seeking to camouflage their exposure whileclosely replicating a portion of the last-three-day settle. Insteadof showing their hand with either market-on-close buying orselling, they did their business TAS,” he said.

A risk management tool offered just in the last few months byNymex, Trading-At-Settle helps to eliminate execution riskassociated with the second and third day before a contract expires.On those days, the settlement price is computed taking the averageof the last two minutes while the final settlement is an average ofthe last 30 minutes. Details from Nymex on the specifics of TASwere unavailable at press time.

According to the American Gas Association, 19 Bcf was injectedinto underground storage facilities last week, bring the total upto 1,027 Bcf. On balance the injection was met with a slightlybearish market reaction as it came near the top of the 0-24 Bcfexpected. Historical comparisons with the number were mixed. The 19Bcf injection was well short of the 45 Bcf six-year average.However it easily outpaced last year’s 5 Bcf refill.

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