Fundamental

The Interior Department’s Bureau of Land Management (BLM) Monday announced fundamental new management strategies, centering on batch processing and area-wide rules, aimed at speeding up its processing of applications for permits to drill oil and gas. The announcement came after the interior secretary told Congress last week the department would be discarding policies installed by the Clinton administration to expand wilderness areas.

With little in the way of fresh fundamental or technical news, natural gas futures traders played it safe Tuesday as they remained mostly on the sidelines in the abbreviated pre-holiday session. Gas futures trading shut down at 1 p.m. EST Tuesday and was set to re-open with Access trading Wednesday at 7 p.m. What activity there was Tuesday was dominated by locals who sold futures early only to cover those shorts late in the session. The net result was a market basically unchanged for the session. February closed the year at $4.789, down 1.1 cents on the day. Estimated volume was 48,835.

With little in the way of fresh fundamental news Wednesday, futures traders remained mostly on the sidelines, waiting for fresh storage data to be released Thursday morning. After gapping higher at the opening bell, the December contract could not hold gains yesterday and quickly fell back into the low $3.80s. Strip-buying was seen for the second day in a row, but it did little for the December contract, which closed with a 2.9-cent decline at $3.854.

After finishing last week on very negative and tenuous footing, natural gas futures extended lower Monday as funds and local traders exerted their influence on a market mostly devoid of commercial players. However, after plumbing a new, four-week low at $3.67 yesterday morning, the November contract struggled back to near unchanged in the afternoon. It settled at $3.74, up 0.1 cents on the day.

With little in the way of fresh fundamental or technical direction, natural gas futures prices chopped sideways Friday as light short-covering and hot weather forecasts were tempered by lower cash market prices. The September contract worked its way higher throughout the first two hours of trading, but hit the skids late in the session as it fell to its settlement price at $2.858, up 1.6 cents for the session. Estimated volume was light, with only 58,581 contracts changing hands.

So much for the “reality” of fundamental weakness forcing prices into a consolidation period. That had appeared to be the case Thursday, but it was being repudiated in a huge way Friday. Gas quotes for the weekend advanced by 20 cents or more at all points, with the West’s larger gains being driven both by cold weather and sharply higher prices for electricity.

Whatever among several possible reasons was responsible for Tuesday’s sharp price upticks was losing its power Wednesday. The market was retreating across the board in movements ranging from flat to more than a dime lower. However, Algonquin citygates were the only points with declines exceeding a dime; other drops were mostly around a nickel or less. Sources could detect no signs of another rally being in the cards.

Besieged by a deteriorating fundamental picture in a market that is already firmly entrenched in a downtrend, natural gas futures traders pressured prices to new lows yesterday, amid a seemingly relentless barrage of selling activity. Even the season’s first triple-digit storage withdrawal (124 Bcf) failed to induce much of any buying sympathy, giving traders little choice but to continue to short the market. The February contract closed 19.7 cents lower at $2.268 and in doing so broke its previous all-time low at $2.415 notched back in February 1999.

The spell of rising prices based on little or no fundamental support finally was broken Wednesday. Price movement ranged from flat to about 15 cents down, with most declines between about a nickel and a little more than a dime. Western numbers tended to see the smallest losses due to a blast of colder than expected weather that prompted a low-linepack OFO by El Paso (see Transportation Notes).