September natural gas futures stretched their losing streak to five for the week on Friday but relative to the economy-dependent crude oil market fared reasonably well.
An unclear tropical picture combined with weak economic data to send September futures squarely into the negative column. Traders also noted that the monthly roll by the U.S. Natural Gas Fund (UNG) proved an inviting target, and the contango widened noticeably. September futures fell 9.8 cents to $3.238 and October lost only 3.5 cents to $3.638. September crude oil shed $3.01 to $67.51/bbl.
“I think the market was following crude oil, and there was a tremendous amount of September TAS (trade at settlement) going through the floor, about 19,000 contracts,” said a New York floor trader. He said it was the UNG fund doing its monthly adjustment of selling the front month contract and buying the next delivery month.
The problem is that the dates are publicized on the UNG website, www.unitedstatesnaturalgasfund.com/ung_rolldates.html, and traders can capitalize on that information by selling in this case September contracts and at the same time buying October before the Aug. 13-18 UNG roll dates. On Thursday the differential widened by 4.9 cents and in Friday’s trading it added another 6.3 cents. “Some traders made a lot of money today [on the roll],” the New York floor trader said.
For the moment market-moving tropical storms may be a ways off. Tropical Depression Two died on the vine and is now a remnant low pressure system, according to the National Weather Service, but a feature south of the Cape Verde Islands has forecasters working their meteorological data overtime.
According to AccuWeather.com meteorologists, a large tropical wave south of the Cape Verde Islands is slowly coming together as clusters of thunderstorms are spiraling in toward a center of circulation near 12N and 24W. “The atmosphere in the path of this feature is not as dry as the air that helped weaken Tropical Depression Two, so strengthening should occur,” said meteorologists Bob Smerbeck and Paul Walker.
They noted that upper-level easterly shear is also present above this tropical wave, which should keep it from rapidly strengthening over the next 12-24 hours. “Computer models continue to strengthen this feature into a hurricane by next week as it moves westward across the tropical Atlantic. This feature will have to be closely watched over the next several days as it may pass near the Lesser Antilles around the middle part of next week. It would likely take until the weekend of Aug. 22 or later to potentially impact the United States.”
Traders focusing on economic data received mixed to negative news. July industrial production and capacity utilization data from the Federal Reserve was about inline with expectations, but the August Consumer Sentiment figures compiled by Reuters and the University of Michigan were a resounding negative. Expectations had been for a reading of 68.5, but the actual figure came in at a soft 63.2. The Dow Jones Industrial Average dropped 76 points to 9,321.
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