Calm

While the waters are calm now, some North American natural gas pipelines could face rough sailing as transportation capacity pricing power is eroded by new development and long-term contracts roll off, according to an analysis by Moody’s Investors Service.

While the waters are calm now, some North American natural gas pipelines could face rough sailing as transportation capacity pricing power is eroded by new development and long-term contracts roll off, according to an analysis by Moody’s Investors Service.

Natural gas futures turned in a fairly calm regular session on Wednesday as at least one trader hypothesized that the market was sidetracked by the much-publicized Commodity Futures Trading Commission (CFTC) hearing on position limits in the energy futures arena. The prompt-month contract closed Wednesday at $4.042, up 4.1 cents from Tuesday’s finish.

Despite a period of relative calm since Hurricane Ike slammed into the Texas coast at Galveston Sept. 13, the Colorado State University (CSU) hurricane team said it expects above-average hurricane activity this month.

Energy regulators and exchanges moved quickly Monday to calm fears about the futures markets after Lehman Brothers Holding Inc. filed for bankruptcy protection and Merrill Lynch & Co. agreed to be sold to Bank of American Corp. for $50 billion. The Lehman bankruptcy roiled Wall Street and financial markets around the world. The New York Stock Exchange was down 410 points; Dow Jones Industrials was off 504 points (the biggest drop since September 2001); and the S&P 500 lost about 57 points in daily trading.

As subtle changes to Hurricane Rita’s path helped calm some traders’ nerves, October natural gas futures relaxed ever so slightly in trading on Tuesday. Following the enormous $1.519 run-up on Monday, the prompt month a day later ended up settling at $12.492, down 17.1 cents on the day.

With the exception of a listless short-covering rally late in the session, trading Monday in the gas pit at Nymex was one bulls would like soon to forget. In addition to its 5.2-cent decline and $5.102 close, the August contract dipped below key support at $5.08, leaving technical traders to seriously consider if the long-standing uptrend in gas futures is over. At 53,067, estimated volume was light for the session.

In their first opportunity following the record-setting snowfall in the Northeast over the holiday weekend, natural gas traders bid the market higher in overnight (Monday) Access trading. However, the market could not sustain its early push above the $6.00 mark and sellers were eager to beat it back late Tuesday morning. The March contract finished at $5.911, up 6 cents for the session but more than a dime off its $6.02 top for the session.

In what was likely the calm before the storm, natural gas prices slid quietly to either side of unchanged Wednesday as traders elected to wait for fresh storage and weather news due out on Thursday. At the closing bell the December contract was 0.7 cents lower at $4.254. Estimated volume was proof of the quiet trading, with only 74,943 contracts changing hands.