Fails

For the third session in a row Wednesday, natural gas futures were fast out of the chute as traders pressured the market to a higher opening trade. However, in contrast to Tuesday when prices held strong throughout the session, Wednesday was another down-day on the charts as non-commercial sellers re-entered the fray. The August contract finished at $2.841, down 2.2 cents on the day, and in the lower half of its 16.5-cent trading range.

For the third session in a row Wednesday, natural gas futures were fast out of the chute as traders pressured the market to a higher opening trade. However, in contrast to Tuesday when prices held strong throughout the session, Wednesday was another down-day on the charts as non-commercial sellers re-entered the fray. The August contract finished at $2.841, down 2.2 cents on the day, and in the lower half of its 16.5-cent trading range.

Despite launching an ambitious restructuring plan to boost liquidity by $2 billion and carry it safely into 2003, Dynegy was hit with further downgrades by all three credit ratings’ services, and its stock dipped precipitously low as the week progressed.

Bulls and bears eyeballed each other across the gas futures pit Monday, but in the end neither group really flinched. The March contract ended the day down a couple pennies with a lower low and a slightly lower high compared to Friday. March closed the day at $2.117, down 2.1 cents. Without a substantial change in market fundamentals, a standoff appears likely.

Putting aside for awhile the fact that there is 1.1 Tcf more gas in storage than at the same time last year, gas futures traders instead apparently focused on the large 190 Bcf withdrawal from storage last week that the American Gas Association reported on Wednesday. February futures prices were up in the high $2.20s during almost the entire regular trading session on Thursday before taking a sharp dive back into the high teens after 2 p.m. February ended the day down 4.3 cents at $2.185 just above its low of $2.18 and well below its high of $2.30.

The cash market paid little heed Wednesday to a winter storm moving into the Southeast and bringing snow to areas that rarely ever see the white stuff. Instead, it concentrated on the futures declines of Monday and yesterday, and the increasing switch to using storage in lieu of buying new supplies, in sending prices down by double-digit amounts at nearly all points.

The credit rating service Standard & Poor’s said Thursday that its ratings for Dynegy Inc., which stand at BBB+/A2, and its subsidiaries will remain on Credit Watch with negative implications, reflecting what it called “several obstacles” facing the Houston-based energy trader. “Foremost is the uncertainty surrounding the pending lawsuit filed by Enron Corp. that alleges that Dynegy falsely executed its right to terminate the merger. Standard & Poor’s cannot at this time determine the outcome of such litigation.”

After checking higher for much of the session Wednesday, natural gas futures moved back down to near unchanged, despite the release of a lower-than-expected storage injection figure. Buyers propelled the December contract back above the psychologically important $3.00 level just as the report was released. However, the advance failed to retest Monday’s $3.08 high, and that was a sign of weakness to traders. The December contract sifted lower from that point, closing with a one-cent loss at $2.87.

For anyone holding Enron Corp. stock one year ago this week, things could not have seemed better. The closing price on Oct. 30, 2000 was $80.68, and the following day, Halloween, shares gained almost $2 to close at $82.06. Today at Enron, however, things look a lot spookier. And despite the plethora of information unmasked by the Houston-based company in the past two weeks, the investment community still seems anxious about any other tricks still to be revealed within the energy trading giant’s complex financial holdings.