After settling below the psychological $7.00 mark for the first time since Sept. 27 on Thursday, December natural gas futures rebounded Friday on sympathy with soaring prices in the petroleum futures complex. The natural gas futures prompt month vaulted back above $7.00 to settle at $7.115, up 24.2 cents on the day.
For the week, December natural gas was down only 6.1 cents from Friday, Nov. 12. The slight weekly decrease was a far cry from the back-to-back 77-cent drops experienced during the two prior weeks (see Daily GPI, Nov. 15).
December heating oil and crude both enjoyed sizeable gains on the day, with heating oil posting a 5.26-cent gain to settle at $1.4826/gallon and December crude expiring $2.22 higher at $48.44/bbl. While the bumps were sizeable, the closing prices still pale in comparison to the highs experienced in late October, when December heating oil and crude were as high as $1.61/gallon and $55.65/bbl.
“I think you can blame heating oil for a lot of Friday’s increase in natural gas,” a Washington, DC-based broker said. “December heating oil has had significant gains recently. I think on a competitive basis that has helped lift the natural gas market.”
The heating oil boom was a result of tightness in stocks, not only in the U.S,, but also internationally. “Remember, these markets are not unconnected,” she added. “I think that was a difficulty for natural gas and sparked some short-covering going into the weekend.”
Commenting that the weather has been fairly unexciting, the broker said she wouldn’t be surprised if December futures drifted back down again heading into expiration. “Storage is full, you really haven’t had a lot of demand and there is a big discount to January,” she said.
“We were swamped in natural gas Friday — a lot of people buying on the dip. One of my clients said they were trying to squeeze in five days next week into a Friday. Open interest isn’t all that great going into the expiring contract, so there may be some effort to get out of positions now. We may be in for a very quiet expiration.”
The broker noted that natural gas could be bolstered by the fact that there is another cold forecast out there for this week. However, she warned that these cold forecasts seem to “continue to fizzle.”
Touching on crude’s giant run-up on the day, the broker said part of increase could be attributed to trouble at a Caribbean refinery, which lost power Thursday night. “Gasoline is up 7 cents on that, so I think crude went along for the ride with the products Friday,” the broker theorized. “In addition, it was December crude’s expiration, which also could have had something to do with it.”
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