Uncertainty over whether the U.S. government’s $700 billion economic bailout would make it through Congress was funneled to energy markets on Friday, which pushed lower as the financial landscape remained bleak. November crude dropped $1.13 to close at $106.89/bbl, while October natural gas expired at $7.472, down 25.2 cents from Thursday’s close and 5.9 cents below the previous week’s finish.
With October off the board, the November contract now takes the lead. November natural gas on Friday closed 30.3 cents lower on the day at $7.628. Even though the prompt month is changing, some industry experts don’t expect the recent trading routine to go anywhere.
“Natural gas futures are doing exactly the same thing they have been doing for weeks,” Steve Blair, a broker with Rafferty Technical Research in New York, told NGI. “It continues to hang out between $7 and $8. The October contract on Friday went off the board right in the center of that range. With November taking over as prompt month, I really don’t see a whole lot changing unless the storage picture starts to radically change.
“Natural gas production from the Gulf of Mexico is close to 50% back, so unless we get some real early cold weather, which reduces storage injections, I just don’t see much impetus to break out of the recent pattern. We have had two weeks of trading with a few penetrations above $8, but we haven’t closed up there. Until we get some news that forces a close above $8 or below $6, I think we are in for at least a few more weeks of the same routine.”
Thursday’s release of Energy Information Administration inventory data caused a momentary surge. The report showed that 51 Bcf was injected for the week ended Sept. 19, somewhat less than Bloomberg and Reuters polls estimating the build to be in the low 60 Bcf range. Just prior to the 10:35 a.m. EDT release of the report, October futures were trading at $7.486, but five minutes after the release of the data October had traded as high as $7.803. In spite of the jump traders were not impressed.
“Obviously, the only reason we rallied Thursday was due to the smallish 51 Bcf storage build,” said Blair. “What is really strange is everyone I talked to in the days leading up to the report was looking for injections right around 50 Bcf. It makes me wonder how the surveys mostly came up with injection estimates in the low 60s Bcf.”
A New York floor trader also was not buying the report. “I don’t see a lot of significance to this report. People were expecting 55 to 65 Bcf and it comes in at 51,” he said. “There’s just so much gas out there the market can’t stay above $8. We would probably be a lot lower if it were not for the crude.” He agreed that natural gas was just caught in a big trading range between $7 and $8. “As soon as you get up to $8.100 to $8.150 people say ‘we’re going higher,’ and next thing you know we’re trading $7.400.”
Others also don’t see much bullish impact from forthcoming storage data but suggest buying the November contract to take advantage of what they see as ultimately a rising market. “We don’t anticipate much more upside impetus off of storage injections that fall short of average levels. This was highlighted in [Thursday’s] trade where an injection some 12-13 Bcf lower than average ideas failed to spark a significant price advance even within the context of a strong oil price environment,” said Jim Ritterbusch of Ritterbusch and Associates. Ritterbusch also looks for a trading range, but longer term he has a bias to the long side. “We are conceding to the likelihood of further consolidation, while at the same time suggesting a cautious bullish approach that would entail probing the long side of the November contract on occasional pullbacks to the $7.700-7.800 zone.”
©Copyright 2008Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.
© 2020 Natural Gas Intelligence. All rights reserved.
ISSN © 1532-1231 | ISSN © 2577-9877 |