Considering the expectations of mild weather in the coming week, some traders were undoubtedly surprised when a number of points, mostly in the East, saw flat to a dime higher pricing Friday. However, the overall thrust of a mixed market was downward, with losses running as high as nearly 35 cents in the Northeast but generally a dime or less.
Although the screen didn’t begin a short-covering spike until most cash business had been completed, it was able to carry physical gas higher in late deals. December natural gas futures eventually settled up more than 31 cents, and that performance was augmented by similar strength in the crude oil, heating oil and unleaded gasoline (at New York Harbor) contracts. The petroleum products were lifted by announcements of declining U.S. inventories and escalating violence in the Middle East, according to news reports. Crude oil for December delivery managed to climb above $32/bbl.
A Midwest trader acknowledged that the Nymex spike was “pretty spectacular,” but seeing it as based entirely on technical short-covering, he asked, “So will any of it translate to the cash market?” Another source thought so; noting that most of the futures increase came too late to have much influence on Friday’s overall cash market, he commented that “cash will certainly be up come Monday. The question is, how much?”
But a marketer disagreed about price advances Monday, saying, “We just won’t have the weather backing.” He did confess to being “more surprised that cash was able to follow in late deals than by the futures spike itself.” The Chicago citygate was languishing close to the first-of-month index in the mid to high $4.60s for most of Friday morning, the source said, but then he saw a few deals get done near deadline about 20 cents higher.
The marketer went on to note that daily physical gas volumes have been relatively small lately, allowing a few large traders “to push prices around more easily.” For that reason he expects a lot of price volatility continuing through the end of November. He also said that in addition to short-covering helping to propel futures Friday, Citigroup had issued a forecast predicting that the East will be “a lot colder” in the last days of month.
A Northeast utility buyer said temperatures would be turning colder again Monday and Tuesday after some weekend moderation, but she didn’t expect the early-week conditions to be a significant market-driver.
“We could easily get a SoCalGas OFO over the weekend,” said a western marketer, quoting the border around $4.30. That was likely to keep traders on the alert because any such OFO alert was unlikely to be available before most went home Friday, she added.
After seeing no below-normal areas in its six- to 10-day forecasts earlier, the National Weather Service had a bit more bullish outlook Friday for gas prices late this week, at least in western markets. It continued to expect above normal temperatures in the eastern half of the U.S. for Nov. 20-24. However, now NWS looks for below normal readings in most of the West as far east as a line from the western edge of the Dakotas to central Arizona.
Looking ahead, a producer thinks the upcoming out-of-sync screen settlement “will help create one of those ‘odd’ bidweeks.” Instead of the normal three business days before the end of the month, December futures will go off the board on Tuesday, Nov. 25, or two business days before November ends. Besides tending to pile up a lot of bidweek business just prior to a four-day holiday weekend, that will also create some unusual swing trading, the producer said. People will do swing deals for Nov. 26-30 on Tuesday the 25th, then for Dec. 1st on Wednesday the 26th, he noted. “That’s really the only way to get it done from a nominations perspective,” he added; otherwise there’s a lot of potential for keystroke errors in entering deals.
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