Fundamentals

The “fundamentals” for oil and gas remain unchanged, but new opportunities have arisen because of “technology or changed circumstances,” Schlumberger Ltd. CEO Andrew Gould said Monday.

April natural gas futures managed an end-of-week rise Friday although short-term traders cited no change in market fundamentals and hinted that they were simply playing well defined trading ranges. Longer-term bulls point to a storage deficit, and bears contend that a decline in horizontal drilling will be necessary for the market to post a bottom.

Still-moderate weather fundamentals for the most part didn’t seem to offer any rationale, but prices recovered some lost ground at all points Monday following an extremely weak weekend market. Without any new developments from previously mostly mild to cool weather, it seemed that at least a bit of “storm hype” must have crossed traders’ minds.

It definitely appears that the bloom is off the price rose that was sustained through much of September despite generally weak weather fundamentals. Only small gains at a few Rockies points were left out of declines everywhere else in trading that began the final week of September on Monday.

The market appeared to be bowing a bit lower than before Friday in acknowledgment of the mostly moderate weather fundamentals that it had largely been defying in the previous two weeks. Even a 6.7-cent gain a day earlier by October futures in the face of an obviously bearish storage injection report failed to prevent a modest majority of points from seeing small declines for the weekend.

August natural gas futures gained ground Tuesday on the day prior to expiration. Traders see little in the way to suggest that any fundamentals have changed, and perceived the day’s activity as movement within a broad and uninspired trading range. At the close August natural gas rose 6.3 cents to $4.675 and September added 6.3 cents as well to $4.646. September crude oil tumbled $1.48 to $77.50/bbl.

Marginal increases in temperature forecasts in several regions kept prices rising at nearly all points Tuesday. Otherwise, fundamentals such as slight prior-day futures weakness and the lack of any Atlantic tropical activity argued against any continued market firmness.

Overall weather fundamentals didn’t seem all that supportive, but prices increased at a large majority of points Monday. The return of industrial load following the weekend was a minor bullish factor, while Friday’s futures gain of 0.3 cent was essentially neutral to the cash market.

Natural gas and oil industry fundamentals are improving “in stride” with the global economy, and with rising economic expectations, energy market sentiment remains “relatively positive,” industry consultant Ernst & Young LLP reported last week.