Direction

With little to no direction from the natural gas futures market on Monday, which gained a mere penny, cash market traders on Tuesday were left up to their own devices. While most cash market points posted small gains on the day, the Northeast region recorded some significant drops as weather and temperatures relaxed.

Natural gas traders are relying more heavily on upcoming weather patterns to determine short-term price direction rather than focusing on storage or demand patterns. The most important demand pattern natural gas futures traders were concerned about Tuesday was the supply of contracts, and the buyers prevailed. January natural gas futures rose 10.6 cents to $7.141 and February added 10.2 cents to $7.278.

Uniformity of price change direction made one of its relatively rare (in recent months) returns to the spot market Tuesday when quotes arose across the board in trading for last-of-month flows. A cold front moving into the western sections of the Midwest Wednesday and freezing overnight temperatures in the Rockies and parts of Western Canada had heating load on the rise, and Monday’s 5.1-cent expiration-day increase by November futures chipped in a little extra support.

Uniform direction of price movement returned to the spot market Tuesday after a lengthy absence. Quotes rose across the board, with only one point failing to realize a double-digit advance. The gains were based primarily on a warm spell in the Northeast and the previous day’s 29-cent increase by the October futures contract, which will see its last day of trading Wednesday.

Unified price movement returned to the cash market Friday, and the direction was downward in a big way. Spot quotes bowed to relatively moderate late-summer weather trends in most areas (either existing or in the weekend forecast), prior-day futures weakness, the weekend drop of industrial load and new indications that little storage injection capacity remains with nearly two months left to go in the traditional injection season.

A majority of the cash market continued to fall Wednesday, and for a change the Rockies joined in the overall price movement direction. The continuing lack of substantive cooling load in what normally is a time of high power generation demand and prior-day screen weakness again depressed the market.

After enduring an ill-fated Tuesday morning rally to a high of $7.065, April natural gas futures reversed direction in the afternoon to record a $6.885 low before settling at $6.892, down two pennies on the day. Despite the second consecutive sub-$7 settle, some market experts warned that the recent trading behavior, combined with the potential for supportive crude and gas inventory reports over the next two days, could mean that the bulls aren’t out to pasture just yet.

The cash market continued its break from the pattern of mixed pricing that prevailed every day last week. The direction of price movement was uniform at all points again Tuesday, but this time it was down instead of up. Moderating weather trends in the Midwest, to be duplicated to a lesser extent over the rest of the week in the Northeast, combined with the pre-existing scarcity of heating load in the South to ease overall spot gas demand.

Following a holiday-shortened trading week in which several points ran contrary to overall market direction each day, all points were on the same price movement page Monday — moving higher, that is. Forecasts of cold weather featuring snow showers Tuesday in parts of the West and Midwest and in much of the Northeast were the primary driver of cash firmness, although a small futures gain Friday and the return of industrial load from its typical weekend absence also contributed a bit of support.