Again

Storm hype or not? It was inevitable that debate on the subjectwould break out again Wednesday after Tropical Storm Irene formedin the northwest Caribbean Sea and cash prices saw this week’suphill climb get even steeper. Virtually all points were rising by15 cents or more, led by New England citygate (Tennessee Zone 6 andAlgonquin) upticks of around a quarter.

Much like two Fridays earlier, the usual drop in gas demand thataccompanies business slowdowns over a weekend failed to have anegative effect on prices last Friday. Although it later fell morethan a nickel, an initially higher screen helped cash achieve gainsranging up to about a dime at nearly all points. Only San JuanBasin, the Southern California border and PG&E citygateregistered losses, and those were small at 3 cents or less.

Adding to losses sustained in the Monday evening Access tradingsession, gas futures continued lower yesterday in sympathy withfree falling physical prices and in expectation of a bearishstorage report today. After gapping a hefty 7 cents lower to openat $2.44 the spot month October sifted lower throughout the sessionto close down 9.2 cents at $2.427. Heavy estimated volume of 89,223served to authenticate the move lower.

To say the weekly storage report has had an impact on thenatural gas futures market lately would be a gross understatement.Following an impressive 69 Bcf injection on Sept. 1, the futuresmarket dropped 26.6 cents the very next day. Then a week later,following the release of a relatively small 66 Bcf refill, themarket took a wild, 24-cent ride higher to close the session in themid-$2.80s. Now, a week later the question that everyone is askingis whether we will see another big move today. At first glance theanswer to that question was a resounding “yes” because shortlyafter the storage figures were released the October contracttumbled a dime lower in after-hours Access trading.

Futures got crushed again yesterday. After settling at $2.737,down 8.8 cents on the day, the October contract plunged to the mid$2.60s during the after hours Nymex Access trading session,following what was perceived to be a very bearish gas storagereport by the American Gas Association. Just one week ago, theOctober contract reached a high of $3.15/MMBtu.

Dennis and Emily joined Cindy Tuesday as the latest namedtropical storms in the Atlantic, and cash prices responded byresuming a climb that had faltered slightly as the week began.Nearly all eastern gains were at least a nickel or greater, withsome points rising by double digits. Somewhat surprisingly,however, most of the dime-or-greater increases occurred in theWest, led by one of nearly 20 cents at the PG&E citygate. TheCalifornia market in general was boosted as Pacific Gas &Electric threw something of a curveball at traders: instead of thefrequent high-linepack OFOs this summer, the one that takes effecttoday is for low linepack (see Transportation Notes).

Natural gas futures surged again yesterday amid concerns thatproduction shortfalls associated with a sudden barrage of tropicalstorm and hurricane activity will put pressure on an already tightsupply-demand situation. Fresh off a 28-cent price run late lastweek, the September contract tacked on an additional 12.6 centsyesterday to finish at $3.064 after notching a fresh high at $3.08.Estimated volume was healthy, with 101,460 contracts changinghands.

California’s major natural gas industry players, some 75parties, will sit down again seeking agreement on a plan forunbundling the Southern California Gas system that has so-farresisted full opening up of intrastate and interstate transmissionand storage for all customers, large and small.

Sweltering heat and higher cash prices tipped the scales inbulls’ favor again yesterday at the New York Mercantile Exchange asprices snapped back with a one-two combo to easily recoup thealmost nickel decline posted during Tuesday’s Access trading. Thefirst spike occurred at the open as speculators were seen loadingup their long positions for the second morning in a row. After thatinitial surge the market moved mostly sideways until right beforethe close, when a round of market on close (MOC) buy orders liftedthe August contract 2.7 cents to its $2.601 final resting place.For the fifth day in a row, estimated volume topped the 100,000mark at 139,502 contracts.