The New York Mercantile Exchange re-opened Friday for a two-hour Internet-based, eNymex Access trading session, making it the first New York exchange to resume trading, three and a half days after terrorists ripped the heart out of Wall Street with the destruction of the World Trade Center. Nymex, whose regular address is just a few hundred yards away from where the Trade Center used to be, ran Friday’s trading from an off-site location. It had suspended natural gas futures trading before the opening of the regular open-outcry session on Tuesday, after the first plane hit the Trade Center at 8:45 a.m. EDT.

Other New York City market exchanges weren’t scheduled to open until today.

Friday’s session didn’t go exactly as planned, in part because of excess pent up demand. Originally the Exchange had hoped to have a single two-and-a-half hour session lasting from 2:30 to 5 PM (EDT). However, it was forced to pull the plug on that session after just 10 minutes of trading Friday, due to technical issues that they believe were caused by heavy trading volume. The Exchange then reopened at 4 PM and conducted Internet trading successfully through 6 PM. The October contract finished at $2.552, up 16 cents from Monday’s close and 2 pennies above where it was when the week began. Estimated volume for the 2 hour session was a 9,031, which is high, considering the lateness of the session and the fact it was Internet-only.

Several traders said Friday’s buying was dominated by institutional fund traders who, after waiting and watching over the past several days, finally got their chance to cover shorts acquired over the past several months. “While commercial traders can lay off some of their risk by using Nymex ‘look alike’ swaps available on EnronOnline (EOL) and Intercontinental Exchange (ICE), the [institutional fund traders] have to use more conventional means and that ties them to Nymex,” a trader said. “They have been conspicuously short across all the hydrocarbons recently and they were looking for the first opportunity to mitigate upside risk.”

While some cash traders thought it a bit odd that the Exchange opened for just 2 hours late in the day on Friday, others were pleased with the decision. “You can trade Nymex swaps on EOL and DynegyDirect, but that eats up your credit. If you have a lot you need to get done, you may obviate your ability to take advantage of an opportunity later.” On the other hand, ICE is different. “Because you are matched with one of many counter-parties on ICE, your line of credit is not such an issue,” he continued. According to a Nymex spokeperson, the Exchange received a considerably amount of pressure from industry participants to open as soon as possible. “Everyone was adamant. Nobody had an issue about the time.”

Another problem with trading futures purely on the online exchanges is the age-old problem of liquidity. “Especially if you are looking at trading the seasonal or calendar-year strips going out a couple years, you might see some pretty unappealing bid-ask spreads on the online exchanges.”

The American Gas Association reported a 95 Bcf injection into the nation’s natural gas storage facilities for the week ending Sept. 8, which compares to a 72 Bcf injection during the same week a year ago and 76 Bcf five-year average. The injection came in slightly above consensus estimates around 85 Bcf and could be a bit of a reality check for traders caught in the hype about the possible impact the terrorist attacks might have on international crude supplies. U.S. natural gas storage levels are 81% full with at least seven more weeks left in the traditional injection season. To reach the full working gas capacity of 3,294 Bcf by Nov. 1, the market will only have to inject an average of a little more than 80 Bcf a week.

Looking ahead, a Nymex spokeperson said they hope to be able to offer the regular open-outcry session this week, possibly as early as Monday. “We are looking at all of our options. Whether it takes place in our regular building or at another site, there is a lot of pressure from the White House to get trading back up and running. We doing everything we can right now.” However, in the event that regular pit trading is not possible, the Exchange is confident — following Friday’s success — it could fall back on eNymex Access trading.

©Copyright 2001 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.