Bearish

Mired in a bog of bearish influences, cash prices continued to drift downward Wednesday at nearly all non-California points. Much like the day before, most of the downturn ranged between about a nickel and a dime, but with larger drops in the teens recorded at several Northeast citygates.

Caught between a bullish short-term weather outlook and a bearish long-term storage situation, traders in the gas pit at Nymex played it safe Friday, electing not to press prices too much in either direction ahead of the weekend. With that the February contract finished the session at $2.204, up 1.9 cents for the day, but down 7.1 cents for the week. Estimated volume was a little less than average, with just 75,087 contracts changing hands.

Given the bearish forces in the natural gas market, Energy Security Analysis Inc. (ESAI) predicts that gas prices, which are hovering at about $2.40/Mcf for the February 2002 futures contract, will continue on a downward trajectory for the next six months, falling 30 to 50 cents more.

Given the bearish forces in the natural gas market, Energy Security Analysis Inc. (ESAI) predicts that gas prices, which are hovering at about $2.40/Mcf for the February 2002 futures contract, will continue on a downward trajectory for the next six months, falling 30 to 50 cents more.

AEC said it has locked in fixed prices for the first nine months of 2002 on 600 MMcf/d of its gas production, or about 30% of its forecasted gas sales. In Canada, 370 MMcf/d was locked in at an average AECO equivalent price of C$3.80/Mcf, and in the U.S. Rockies, 230 MMcf/d was sold forward at an average Opal equivalent price of US$2.61/Mcf.

After some dalliance with flat pricing over the previous couple of days, the cash market Friday finally assumed the total softening mode that many had believed was its rightful status all along. Few points failed to fall less than a dime, but drops of more than 20 cents were largely confined to the San Juan/Rockies and border-SoCalGas markets.

Despite double-digit losses in the cash market, natural gas futures finished the week with only a slight downtick Friday as traders were unable for the second day in a row to press prices beneath support at $2.83. The December contract finished the session at $2.925, down 3.5 cents for the day and 32.3 cents for the week. The winter strip followed suit, slipping 2.2 cents to $3.066. However, the rest of the months were resilient to the price weakness, with all contracts from April 2002 forward notching a gain for the session. Trading activity was spare, with as an estimated volume of just 61,836.

In a preemptive move ahead of what could be another bearish storage release today, natural gas futures slipped lower yesterday as profit-takers rescinded advances achieved in Monday’s expiration session. The December contract began its tenure as prompt month in dramatic fashion, gapping lower at the open en route to a 15.6-cent decline and $3.183 close.

In a surprising show of strength considering the price-bearish fundamental picture, natural gas futures soared to new two-month highs again Monday as fund traders continued their accumulation of long positions. A gap higher open set the stage early yesterday and bears never fully regained control, watching helplessly as November traded to $3.30, its highest level since Aug. 22. The prompt month closed just off that level, up 16.1 cents for the session and 95 cents for the month at $3.202. Estimated volume was typical for an expiration day, with 100,102 contracts changing hands.