Bidweek

Physical natural gas prices fell about 2 cents Wednesday as traders finished up bidweek futures trading and factored in volatile near-term weather forecasts. Isolated strength was noted at some Northeast points, but for the most part the decline was widespread with all points flat or in the loss column. At the close of futures trading the expired April contract had lost 1.7 cents to $2.191 and May had eased 1.2 cents to $2.282. May crude oil dropped $1.92 to $105.41/bbl.

Bidweek opened with the cash market advancing over a dime nationwide Monday with the strongest performers in southern California and the Northeast. Traders suggested a long approach to the Northeast cash market but acknowledged whether to buy index and sell physical or sell index and buy physical was a weather call. At the close of futures trading April had fallen 4.9 cents to $2.226 and May had slid 5.4 cents to $2.319. May crude oil gained 16 cents to $107.03/bbl.

Despite gas prices hovering near $11 currently and averaging $7.17/MMBtu so far this year (Henry Hub cash bidweek) mainly on fears of a supply shortage, the Potential Gas Committee’s latest report on the nation’s gas resources shows a total available gas resource of 1,308.3 Tcf, or nearly 70 years of gas supply produced near the current annual rate. The problem, according to the American Gas Association (AGA), is accessing that supply.

In a quiet weekend market prelude to the beginning of June bidweek, prices fell in mostly moderate amounts Friday. However, OFOs declared for Saturday by both of California’s huge distributors (see Transportation Notes) had an impact felt throughout much of the West, where all of the declines of more than 20 cents were recorded.

Cold temperatures expected over the weekend and the continuation of strong cash market prices were enough to dissuade sellers from pressing the natural gas futures market lower Friday. At the same time, buyers were hesitant to push their luck following the recent run to seven-week continuation chart highs. As a result, the April contract was left to chop lazily sideways ahead of the weekend on light volume of 71,786 contracts. The prompt month finished at $2.359, up 0.2 cents for the session, but down 4.1 cents from its $2.40 open last Monday.

Two basis swap contracts based on NGI’s bidweek indexes atChicago and the Southern California border were among a number ofenergy products approved last week for listing on enymex, the NewYork Mercantile Exchange’s Internet-based trading system. Nymexexpects to launch the new system during the second quarter of 2001.

Although indexes won’t be set until Friday, the bidweek numbersbeing reported to GPI suggest that October prices will reflectmonth-to-month declines of about 30 cents, give or take a fewpennies. A Southwest-oriented marketer said October looked a bitsofter on Wednesday, but a Calgary trader said intra-Alberta priceshad been rising into the low to mid C$3.20s since Monday.

How quickly the market can change! Just two days after finishinga bidweek that saw indexes climb 30 cents or more, traders tookcash prices down Thursday to levels looking much more like Augustindexes than those of September. It was a rare point that managedto avoid a double-digit decline, and some registered drops of 20cents or more.

With moderating temperatures, a hurricane lull and an upcomingholiday weekend pulling the rug out from under bidweek cash prices,the Nymex October futures contract also decided to take the plungeyesterday, plummeting into the $2.70s before settling in thelow-$2.80s and adding to last week’s market dip. Some observersbelieve October is destined to test at least the $2.60s before thisdrop is over.