Factors

The current factors affecting the gas market have created a “hair trigger environment for gas prices,” according to Consultant Stephen Smith. And FERC’s Steve Harvey, deputy director of market oversight and assessment, seems to agree that most market indicators currently point to continued high prices through the winter and perhaps much longer.

The exploration and production (E&P) sector will continue to benefit from “very favorable” industry fundaments as the year progresses because of two factors: strong earnings because of high commodity prices that have far outpaced service costs and “attractive” stock valuations, according to a report by Raymond James’ energy analysts.

Caught between longer-term bearish fundamental market conditions and shorter-term bullish technical factors, the natural gas futures market chopped sideways to higher in relatively light trading activity Tuesday. And while neither side could claim the day as a victory, the market finished on a positive note, with the June contract ekeing out a 3-cent advance to close at $6.476.

Strength in the petroleum complex along with technical factors prompted a 20.7-cent increase in the December futures contract to $7.678/MMBtu Wednesday despite a larger than expected 34 Bcf gas storage injection reported by the Energy Information Administration (EIA) for the week ended Nov. 5.

Strength in the petroleum complex along with technical factors prompted a 20.7-cent increase in the December futures contract to $7.678/MMBtu Wednesday despite a larger than expected 34 Bcf gas storage injection reported by the Energy Information Administration (EIA) for the week ended Nov. 5.

A reduction in generating resources, resulting from potential risk factors such as an aging number of power plants, environmental regulations, as well as financial uncertainty in the market, could bring about deficit electricity conditions in certain areas of New England within the next two to four years, ISO New England (ISO-NE) said on Thursday.

Plagued by an array of bearish fundamental and technical factors, the natural gas futures market continued a slow, methodical grind lower Tuesday as calculated scale-down, end-user buying matched up with commercial and speculative selling activity. After an early rally failed to attract much support, the September contract shuffled lower throughout the session to finish at $5.373, down a half-cent for the day.

Multiple bearish factors seemed to converge on Thursday and Friday to keep downward pressure on the natural gas cash market. As Gulf production resumed after Tropical Storm Bonnie and Hurricane Charley made landfall, traders were faced with below normal temperatures, cooling rains from the storms and a continuation of higher than expected storage injections. That last item could be the one that has the most lasting impact, according to Thomas Driscoll of Lehman Brothers.

It was easy to be a natural gas futures bull Tuesday. In addition to another round of frigid forecasts and spiking prices in the cash market, natural gas futures traders had added buying incentive as crude oil prices spiked following a deadly explosion at an Algerian gas liquefaction plant Monday.