The natural gas futures market kicked off 2002 on Wednesday in much of the same way it concluded 2001 — by funneling to new lows amid undeniably bearish fundamentals. Traders didn’t need the release of fresh storage data (pushed back until today at 2 p.m. EST) to tell them that supplies are plentiful. Meanwhile, the downtrend remains intact and the current spate of cold weather is showing signs of moderating. The February contract took the news squarely on the chin, tumbling 10.5 cents to close at $2.465.
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Thanks to the one-two punch of a much-below-expectations storage injection report and somewhat premature winter weather that was producing near-blizzard conditions in parts of the Upper Plains and Upper Midwest, spot prices spiked intensely Thursday for gains in excess of 40 cents nearly across the board.
Projecting linepack sinking below its minimum target levels over the next few days, Pacific Gas & Electric issued a systemwide Stage 3 low-inventory OFO for today. The OFO carries penalties of $5/Dth. The tolerance for negative daily imbalances is minus 2%.
Fresh off their success in not allowing natural gas to dip below major support on Monday, natural gas bulls reared their horns yesterday as they prodded prices to a constructive opening print. However, further advances were hard to come by, leaving the market to check mostly sideways for the rest of the session. The August contract closed at $3.165, a hike of 9.7 cents on the day.
After a briefly checking below support at $4.00 and then back up into the low $4.10s, natural gas futures limped lazily sideways for much of the session Thursday as trade buying met almost equally with fund and local selling. At the closing bell the July contract was 7.4 cents lower for the session at $4.038. Estimated volume was relatively light, with only 67,994 contracts changing hands.
The May aftermarket began at price levels considerably below first-of-month indexes in nearly all cases, and several traders advised against anyone holding their breath while awaiting an upturn of any significance. They cited a screen plunge Monday that was about twice as large as any of last week’s single-day drops, a general near-term weather outlook that remains on the benign side, and expectations of another big storage injection report (Lehman Brothers is projecting 70 Bcf).
Amid a steady stream of non-commercial selling, natural gasfutures tumbled lower yesterday morning, renewing fears that themarket may not have reached a bottom and further losses arepossible. Plunging to its lowest level in more than three months,the April contract took the selling on the chin yesterday, falling15.7 cents to close at $5.006. Volume at Nymex was healthy with anestimated 56,626 contracts changing hands.
A revised National Weather Service forecast, expanding theprediction of below normal temperatures for the Christmas weekendto the entire United States except for the sparsely populated UpperPlains, kept most prices from softening Friday, as some hadanticipated. Except for the still-most-expensive West Coast market,all other points realized gains from about a dime (San Juan Basin)to a little more than 50 cents (Northern Natural Gas market area).
California energy officials declared another power alert Mondayas statewide electricity reserves threatened to dip below 7% in theface of near-record cold weather power demand and more than 11,000MW out of service, about 4,000 MW of which were on an unplannedbasis. Part of the unplanned loss of generation capacity wasattributed to a transmission breakdown in the San Joaquin Valley onpart of Pacific Gas and Electric Co.’s system.
Projecting that linepack would slip below its minimum targetlevel through Thursday, Pacific Gas & Electric issued asystemwide Stage 3 OFO, effective today until further notice. Theorder carries penalties of $5/Dth for negative daily imbalancesexceeding a 3% tolerance.