Expiration

After a wild week that saw the natural gas futures market survive heat waves, August’s expiration and a 7 Bcf storage withdrawal in the heart of July, natural gas futures traders gave it a rest on Friday. In its first regular session action as front month, September natural gas briefly sank below $7 before settling at $$7.184, up 6.1 cents on the day and 93.6 cents higher for the week.

While most industry players had been expecting a fairly quiet expiration for the July natural gas futures contract, bears kept the pressure on in trading Wednesday. After hitting a low of $5.810 late in the session, July natural gas ended up going off of the board at $5.887, down 22 cents on the day.

One day ahead of the July natural gas futures contract expiration, the New York Mercantile Exchange Inc. (Nymex) announced some margin increases Tuesday for its natural gas, Henry Hub swaps, Nymex miNY natural gas, Henry Hub swing swap, Henry Hub penultimate swap, and the natural gas penultimate and last day futures contracts. The changes will go into effect at the close of business on Thursday.

With April expiration occurring during the week and traders suffering from a little spring fever as temperatures moved higher, May natural gas futures ventured lower Friday on low-volume trading. After putting in a $7.120 low on the day, the prompt month rebounded a little to settle at $7.210, down 27.7 cents for the day and 24.7 cents lower than the contract’s close in the previous week.

Even as May crude futures ran significantly higher, April natural gas — one day ahead of expiration — traded within a slim 15-cent range in Tuesday’s regular trading session at the New York Mercantile Exchange before closing at $7.214, up 14.7 cents from Monday’s close. May crude increased $1.91 to close at $66.07/bbl.

A new report by Merrill Lynch highlights the wave of legislative proposals in Illinois, Maryland, Delaware and Connecticut prompted by rising utility rates due to the expiration of rate caps and higher power prices. Several proposals call for utility reregulation, while others would extend rate caps or place new limits on how much rates could rise in a year.

With the November contract’s expiration out of the way, December natural gas spent its first regular session as front month exploring support lines. After notching a low of $12.88, December went on to settle at $13.055, down 62.9 cents on the day and 11.2 cents lower than the contract’s previous Friday close. November natural gas expired Thursday at $13.832.

Buoyed by Tuesday’s expiration-day screen spike of 32.4 cents and almost nothing else, prices for end-of-March flows saw substantial gains Wednesday. Increases were fairly consistent and spread evenly through all market areas in ranging from a little less than 20 cents to nearly 35 cents in nearly all cases (the exception was a rise of a little more than a dime by OGT in the Midcontinent).

Bringing some form of reasonableness back to the natural gas futures complex, the November contract started the week by giving back a small percentage of the sizeable gain recorded last week. The prompt month, which expires Wednesday, settled down 21.5 cents at $7.89.