Moving in a zig-zag fashion for the majority of the day, January natural gas futures seemed to have at least some of its action on the day dictated by the petroleum complex. The prompt month settled up 6.2 cents Wednesday at $6.683.
While the inventory reports from the American Petroleum Institute and the Department of Energy fell mostly in line with expectations, crude oil and especially heating oil futures spiked higher. January crude finished 48 cents higher at $41.94/bbl, while January heating oil closed 3.63 cents higher at $1.2599/gallon.
Natural gas rose with petroleum to hit a morning high of $6.75, before falling lower to carve out the $6.54 low on the day. Just prior to settlement, January inexplicably jumped higher.
“This overreaction in the oils sparked by the inventory reports really appeared to influence natural gas futures Wednesday morning,” a Washington, DC-based broker said. “Since we are in bear mode, the morning rally in petroleum was ‘sell the rumor and buy the fact.’ Everybody had been selling all of the way down on the belief that we were going to get oil inventory builds, and we get builds.
“The little natural gas rally at the end of the day seemed to be nonsense,” he added. “In large part, I believe it was things feeding on themselves and stops getting hit. I think due to the nature of the late-day rally, it really was a lot more local trading than off-the-floor paper coming in. I am not enthusiastic about the strength of the close. Clearly, I see nothing that would make me believe that we are pulling out of the down-mode here.” On the downside, the broker said he sees support in the very short term of $6.44, and then back down around $6.16.
Looking at Thursday’s Energy Information Administration storage report for the week ended Dec. 3, the broker said he believes it will be a withdrawal of 73 Bcf to 82 Bcf, which pales in comparison to the five-year average draw of 101 Bcf and last year’s 111 Bcf pull.
“So the storage outlook and the weather forecasts are not very bullish for natural gas prices,” he said. “I just don’t think we are seeing any weather out there at the moment that gives us any hope for a rally.”
The broker added that reports of cold in a few weeks aren’t enough for traders to hang their hats on. “Everybody has become a Missourian when it comes to the topic of weather,” the broker said, referring to the state’s ‘Show-Me State’ moniker. “They want to see it for themselves.
“If you look at the strength of this down market, there is no doubt that it will end, but it first needs to show some signs of basing. We haven’t had a selling climax yet and I don’t think we will have that at $6.50. I haven’t had producers calling saying, ‘Oh my gosh, I missed it, I have to sell this thing now.'”
©Copyright 2004 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.
© 2023 Natural Gas Intelligence. All rights reserved.
ISSN © 1532-1231 | ISSN © 2577-9877 |