futures

Forcing natural gas futures to go on a run in Thursday morning trading, an updated weather forecast from Salomon Smith Barney meteorologist Jon Davis points toward an “Arctic plunge” that is expected to grip most regions of the country in the second week of January.

Even prior to last week’s massive storage withdrawal of 162 Bcf and $5-plus January futures prices, the Energy Information Administration (EIA) had tacked on another 46 cents/Mcf to its first quarter 2003 natural gas wellhead price forecast compared to last month’s prediction in its Short-Term Energy Outlook. In the latest Outlook, EIA said it is expecting first quarter prices to average $4.16. It also raised its price forecast for all of next year to $3.69/Mcf from its prediction last month of $3.37.

Like the snowfall piling up in New England, long positions filled the natural gas pit on Thursday as bulls received yet another double-dose of supportive news in the form of fresh weather and storage (162 Bcf withdrawal) reports. By 11 a.m EST the January contract had blasted through the $5.00 mark. With sellers backing away, the prompt contract was able to continue higher in the afternoon to top out at a new 19-month continuation chart high at $5.15. January finished at $5.089, up 38 cents for the session.

In what was likely the calm before the storm, natural gas prices slid quietly to either side of unchanged Wednesday as traders elected to wait for fresh storage and weather news due out on Thursday. At the closing bell the December contract was 0.7 cents lower at $4.254. Estimated volume was proof of the quiet trading, with only 74,943 contracts changing hands.

Natural gas futures took a long road to nowhere Thursday as prices moved to either side of the recent trading range on waves of local and commercial liquidation and short-covering.

The current level of volatility in the natural gas futures has some traders wondering if all that has happened is that one form of weather-induced volatility has been traded for another form or price hyperactivity.

For the second day in a row, the natural gas futures market opened higher but fell lower late in the session as traders elected to take profits on the hunch that all the bullish news available has already been factored into prices. By virtue of losses Friday, Monday, and Tuesday, the November contract becomes the first prompt month since September to notch a string of three down days. It closed at $4.11, down 4.7 cents for the session and a whopping 31 cents beneath Monday’s 18-month high at $4.42.

Platts Global Energy said it has received a subpoena from the Commodity Futures Trading Commission (CFTC) for documents, employee information, policies and customer lists for price reports it publishes in its energy publications. The subpoena is part of a broad investigation of energy trading practices the CFTC is conducting, that was sparked by disclosures about Enron. A number of energy companies already have provided information to the CFTC. Two companies, Dynegy and AEP have admitted they provided false data to some price reporting publications. The companies have not publicly identified the false reports by time or location, nor is there any information as to whether the false reports were used by the publications, which have screening methods to eliminate suspect information. The subpoena seeks a list of current and former Platts employees “responsible for gathering, editing, verifying and publishing the information” and policies and training manuals for new price reporters. It also demands notes and other records of third-party services used in price gathering, and any information that “indicates any person’s knowledge of false, inaccurate or otherwise incorrect pricing and volume information,” Platts said.

After watching prices bubble higher during the overnight Access trading session, natural gas bulls were treated to a gap higher opening Tuesday morning, as concerns over storm curtailments lingered. However, once the follow-through buying had run its course and resistance in the $3.88-90 area had held, prices shuffled lower in the afternoon. The November contract finished at $3.862, up 12.2 cents on the day, but down 2.8 cents from its high for the session.