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Market Mixed; $4 Price Point Dissected
Following three straight days during which cash prices nudged higher almost across the board, natural gas traded Thursday for Friday delivery was a mixed bag of minor pluses, minuses and a fair amount of points that went unchanged. Almost all of the additions or subtractions were by less than a nickel, potentially signaling just how content the market is with the current price point.
While average in the East, Midcontinent and Gulf Coast on Thursday saw just as many gains as losses, spots in the Rockies and further west saw widespread gains from a few pennies to a little more than a nickel.
All cash averages will experience some very bearish influence on Friday as futures crashed lower Thursday following a bearish storage report from the Energy Information Administration (EIA). The EIA reported that 87 Bcf was injected into underground inventories for the week ending Sept. 9, which was on the high side of industry’s expectations. October futures reached a low of $3.875 during the regular session before closing at $3.878, down 16.1 cents from Wednesday’s finish (see related story).
“The build was in the upper part of the range of expectations and has sparked a bearish price reaction, but since it was less than the 94 Bcf our model had produced, we think it could have been worse,” said Tim Evans, an analyst with Citi Futures Perspective in New York. “The key for prices will be how much damage this inflicts. If the downside proves limited and prices recover [by the weekend], then passing the test could lead to a move higher, in our view.”
Much has been made of the market’s recent attraction to the $4 price level. Some analysts have noted that because the number keeps popping up so often, producers are even adjusting to be able to do business at it (see Daily GPI, Sept. 15).
“If you scan the indices and look for a trend, it’s not hard to see that a vast majority of the price averages fall just on either side of $4,” said a Northeast trader. “We’ve seen this price level quite a lot, so I think people feel pretty comfortable with doing business in this [price] area. Adding a little bit of stability to the equation is the futures market. Front month futures have been oscillating on either side of $4 since the beginning of August. Will this last forever? Of course not. But has it been a pretty stable price level for at least the last month? The answer is yes, and until we get a significant fundamental shift, we’re likely to stick around here.”
On the weather front, traders were able to take their eyes off of the tropics for the first time in weeks. The only storm currently on the radar is Tropical Storm Maria, which was halfway up the U.S. East Coast Thursday afternoon but well out into the Atlantic.
Near-term weather forecasts are not offering much in terms of price direction advice as they remain virtually unchanged from a few days ago. According to the National Oceanic and Atmospheric Administration’s six- to 10-day forecast covering Sept. 21-25, the western half of the country, the north central portion, and New England are expected to experience mildly above-normal temperatures while much of the Southeast will see mildly below-normal readings.
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