Erosion

Stemming a two-day, 22-cent price erosion, natural gas futures turned modestly higher in an abbreviated pre-holiday weekend session Friday, as profit taking gave way to a steady stream of end-user buying. The March contract looked poised to hit the $2.12 low notched last Monday, but after sellers ran out of gas early Friday the way was paved for a positive close. At 1 p.m. Friday the March contract settled 2 cents higher for the day and 1.5 cents higher for the week at $2.206.

Despite severe erosion of Nymex futures prices for natural gas, crude oil, heating oil and Appalachian coal Monday morning, cash gas numbers refused to “follow the screen.” Cash quotes ranged from flat to a few cents higher or lower in most market areas. Rockies points were recovering from Friday’s plunge that had a few priced below a dollar for a while. Deals for CIG, Cheyenne Hub and Questar gas could still be found in the $0.90s Monday, but generally they were in the $1.00s, according to a couple of marketers.

Following Monday’s 8% price erosion and ahead of July expiration today, natural gas traders adopted a wait-and-see approach Tuesday, as light buying was slightly overpowered by continued short selling. At the closing bell, the July contract was 4.9 cents weaker at $3.397. Volume was light for a penultimate trading day with only 82,002 contracts changing hands.

At least temporarily, the slide in May swing prices came to an end for much of the cash market Thursday. Rockies/San Juan/Pacific Northwest and non-Malin California numbers remained on the downhill path, but eastern and Southwest basin prices generally ranged from flat to a dime or so higher. Most eastern points, though, were only barely above flat.

After watching prices tumble 10% last week, bears in the naturalgas pit were content to cool their heels Friday in an amazinglyquiet trading session. The November contract slumped just 1.4 centsto close at $4.937 Friday after trading within a tight, 13-centtrading range. Estimated volume was light, with just 63,929contracts changing hands.

Despite spring-like weather here, there and almost everywhere,this week’s price erosion came to a halt Thursday as many pointsturned in flat performances and a few managed small rallies.

Adding to the price erosion that began last Tuesday, natural gasfutures tumbled lower at the New York Mercantile Exchange Monday asunsupportive cash market values met with heavy local selling.However, when a second wave of selling failed to materialize,speculative traders were forced to cover shorts into the closeyesterday, sources said. The August contract finished at $2.144,down 1.9 cents on the day.

Rising sales volumes and favorable currency exchange rates morethan made up for erosion of prices fetched by Canadian exports inthe last natural gas contract year.

The futures market experienced heavy expiration-day lossesyesterday, adding to price erosion that occurred Tuesday. Novemberwas particularly hard hit, slipping 13.6 cents to settle at $1.972.Weak October cash prices and follow-through selling by traders whohave elected to ignore and discount the threat of Hurricane Mitchwere reasons cited for the decline. Trading was active, with nearly150,000 contracts changing hands.