The cash market continued to eke out small gains Tuesday inquiet activity that was starting to remind some of last month’sgeneral lack of volatility. New averages ranged from flat to abouta nickel higher, with the varying increases scattered throughoutthe producing and market areas.
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Industry merger and acquisition activity yesterday was astartling confirmation of two major trends: the convergence of gasand electricity operations, and consolidation. Two more of thenation’s largest diversified gas pipeline companies were snatchedup by two major energy distributors. Sempra Energy (SRE) bought KNEnergy (KNE) in a stock-and-cash transaction valued in theaggregate at $6 billion, a 24% premium to KNE’s recent stock price,and Dominion Resources bought Consolidated Natural Gas Co. (CNG)for about $6.3 billion in stock, a 25% premium.
After being limited to a moribund 2.5-cent range Wednesday, theMarch futures contract snapped back to life yesterday as bulls andbears took turns exerting their influence on the market, which ledto a 7.5-cent trading range. Thursday’s 3-cent setback andsubsequent $1.746 settle would be considered an almost non-eventamid typical winter volatility, but the move was a welcome changeto traders who have grown weary of the slight moves and tighttrading ranges over the past month. Those traders reactedaccordingly, burgeoning estimated volume to 86,227.
After a tempest of trading activity during the first three daysof the week, the futures market settled down Thursday to trademostly sideways amid light volume. Moderate trade-buying below the$2.32 level was the most notable feature of the day. But that wasenough for December to post an up-day-marked by higher highs andhigher lows-to start off its tenure as prompt month. The contractsettled at $2.348, a 2.4 cent gain for the session.
The surge that has characterized cash trading activity this weekcontinued Wednesday but at a significantly slower pace, suggestingto some that prices had reached or were nearing peaks. The newupticks left most eastern points in the vicinity of October indexlevels, while markets in the West padded their already considerablestandings above indexes.
In what a few sources described as some of the quietest tradingthey had seen in quite a while, cash quotes fell anywhere from 2cents to a dime or so at Eastern points Monday. In contrast,numbers were generally flat to slightly higher for the Rockies,Southwest basins, California and intra-Alberta.
A casual glance at the futures table — its narrow trading rangeand its small daily change — would lead one to believe Wednesdaywas a relatively quiet expiration day at Nymex, during which theAugust contract was ushered off the board at $1.942. ButWednesday’s trading was anything but ordinary. Traders wereinundated by a host of technical and fundamental factors, leadingto “very choppy” trading and heavy volume of 116,428.
Activity at the New York Mercantile Exchange resumed after thelong holiday weekend Monday, and apparently traders hit the marketwith one primary objective in mind: to sell. The spot Augustcontract opened at what turned out to be its daily high of $2.43,and ended up falling 7.4 cents to settle the day at $2.365. Anestimated 32,810 total contracts changed hands.
The June Nymex contract showed what hefty storage activity cando to the market by falling 7.7 cents to settle Thursday at $2.221The only good news for bulls is that the contract managed torebound after briefly falling below major support at the $2.160level. “The market has been wounded. People ignored the storagenumbers for too long, but they can’t ignore them anymore. The 345Bcf surplus is the largest we’ve had this year, and we’ve had fourstraight weeks where we’ve added to that surplus,” an analyst toldGPI.
Despite one marketer’s assertion that not too much is happeningin the May bidweek market yet, activity was far from lacking at theNew York Mercantile Exchange Monday. The spot May contract lostanother 7.6 cents to $2.266 yesterday, as traders continue to getout of their May positions before the contract goes off the boardat 3:10 EDT this afternoon. An estimated 93,800 total contractschanged hands.