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Market Breaks Out of Rut with Gains of 15-50 Cents
Until yesterday the February aftermarket was rather dull and stodgy, with small price movements up or down (mostly up) characterizing each trading day. But the pattern got broken Tuesday with upticks consistently in the range of 15-20 cents reported for both eastern and western points. Larger gains of 30-50 cents were recorded in the Northeast, with a few citygate points seeing WACOGs above $3. (Intra-Alberta and Westcoast Station 2 were also above $3 in Canadian dollars.)
The basis of the new market strength wasn’t readily apparent, as several people offered their individual ideas, like pieces to be used in solving a puzzle. A Midcontinent/Midwest source said some traders expressed concern about the latest FBI warning of potential terrorist attacks that could have begun as early as Tuesday. The North American gas delivery system is considered a viable target of such attacks, he said, so some wanted to take precautions against the possibility of a supply disruption. He and others also reiterated what several traders have said about general price firmness since late last week: people are still covering short positions that they brought into February.
The above source reported not seeing much influence on cash from Monday afternoon’s screen run-up. But another trader said the leftover momentum from that uptick, plus further mild futures strength Tuesday, was responsible for at least part of the cash gains.
There was similar disagreement about the role of weather. Traders in both eastern and western markets thought weather was still too mild to be a price booster. But a Northeast marketer said highs in most of his region weren’t expected to get above the 20s today, so that was undoubtedly why Tuesday’s biggest price increases occurred there. He added, “I don’t think the terrorism threat is all that valid as a price booster, but really haven’t heard much of anything better as an explanation” for Tuesday’s big gains.
A western trader said prices in his region rose by amounts in the upper teens, much the same as in the East but without any of the much larger increases like those in the Northeast. “Things got a little weaker near the end, but were still very strong overall,” he said. At first the only supportive influence he could discern was the previous afternoon’s screen strength throughout the energy futures complex, but said talk about a possible terrorist attack on gas infrastructure sounded somewhat plausible. He agreed that weather was too mild to play a significant role.
As if all those at least semi-valid assessments of the burst of bullishness weren’t enough, another source suggested that the trading community may have been looking ahead to what is expected to be a sizeable storage withdrawal report this afternoon from AGA, with many prior guesses centered around the 130-140 Bcf range. Although it might not mean much against the overall glut of storage, such a volume would take another whack out of the year-on-year surplus, which could have a psychologically bullish effect, he said.
A western source may have had the final word: “I’m not buying any of these explanations. I expect prices to go back down [today] simply because there was no reason in the first place for them to have gone up [Tuesday]”
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