October natural gas futures rose as traders elected to minimize risk to higher prices and covered short positions prior to the weekend as Tropical Storm Ingrid moved west. It is a common practice for traders to not carry any kind of short position over a weekend especially during hurricane season when prices could shoot higher Monday should the storm appear to threaten the Gulf Coast. October futures rose a hefty 25.0 cents to settle at $6.279 in active trading on the New York Mercantile Exchange.
At 5 p.m. EDT Friday, the National Hurricane Center reported the center of Tropical Storm Ingrid was located about 710 miles east of the Lesser Antilles, was moving to the northwest at 8 mph and sported winds of 40 mph with higher gusts. Ingrid was increasingly looking like a nonevent for the gas market, with the NHC’s five-day “cone” of projected tracking indicating that the storm’s path likely would aim it closer to Bermuda instead of the U.S. The agency’s late Friday afternoon advisory also said Ingrid was “forecast to remain out to sea and weaken.”
According to AccuWeather, Ingrid is predicted to maintain a slow west-northwest track through the weekend due to a weak steering flow, taking it north of the Lesser Antilles by early next week. “We do not expect this storm to strengthen much beyond tropical storm strength due to increasing upper-level shear helping to limit development during the movement to the northwest,” said meteorologist Rob Miller.
‘Traders overnight and into the morning were thinking a storm play, but later in the session prices came off because no one thinks the storm is going to do anything,” said a New York floor trader. October futures traded to a high of $6.490 before settling at $6.279, or 9.1 cents lower than its opening price of $6.370. “If nothing goes on with the storm over the weekend we will come in unchanged to a little lower,” he said.
Other traders are defying the conventional wisdom and using the day’s gains to initiate short positions. “We have some trading accounts doing some selling at $6.40 and earlier at $6.20,” said a Denver broker. He added they were anticipating holding on to the short positions to the expiration of the October contract on Sept. 26 and were looking to close out the trade “well below $6.”
“We have also been doing some light selling in the winter contracts, but we are expecting a price jump in October or early November and will leave some room to do more aggressive selling. We expect the winter strip could move up as much as a $1 and will do some more selling then,” the broker said.
Jim Ritterbusch of Ritterbusch and Associates sees lower prices, but cautions a drop to the depths of the fall of 2006 ($4.05 was reached Sept. 27) probably isn’t in the cards. He notes that record high crude prices, stronger industrial use, more voluntary production restraint and the fact that the hedge funds are still sitting on a sizable net short position in contrast to a significant net long position a year ago lead him to project “a price bottom during the coming weeks approximately 70 cents or some 17% above last year.”
©Copyright 2007Intelligence 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 |