Pivotal

Pivotal LNG, a Southern Company unit, this week completed another multi-year contract to supply liquefied natural gas (LNG) to Crowley Maritime Corp. for shipment to Puerto Rico. The companies signed a similar multi-year deal last August.

What might seem to be just another down day Tuesday may prove to be more pivotal than some traders imagine. Prices made an early stab to as low as $3.448 in electronic Globex trading slicing through widely heralded technical support at $3.500. Market technicians re-calibrated their estimate of what now constitutes technical support 12 cents lower, and if that is taken out, traders may very well be looking at natural gas futures with a $2 handle.

The cold front that moved into the Midwest and East last week proved to be pivotal for the natural gas storage picture as the Energy Information Administration (EIA) reported Wednesday that 8 Bcf was withdrawn from natural gas stores for the week ended Nov. 18. The first withdrawal of the season was seen as bullish when compared to a majority of the industry’s expectations. However, on weak pre-vacation volume, the prompt month closed out the short week at $11.620, six-tenths of a cent higher on the day.

After plumbing new two-month lows late last week, the natural gas futures market rebounded impressively Monday on the undeniably bullish combination of surging crude oil prices, forecasts calling for continued below-normal temperatures and expectations ahead of this Thursday’s storage report.

Natural gas futures tumbled lower Thursday in what one trader described as an “orderly price rout.” After vacillating wildly in the 10 minutes after the storage report was released (featuring a 11 Bcf injection), the market paused in the low $4.30s and then proceeded to fall 23.3 cents on the day to $4.156, December’s lowest close in three weeks.

After carving out an 8.5-cent trading range during the first 50 minutes of trading Tuesday, natural gas futures settled down and chopped lazily sideways for the remainder of the session. The October contract finished at $3.356, down 4.3 cents for the day and just above its $3.34 low. At just 72,545, estimated volume was indicative of a market that is uncertain what forces will impact the natural gas futures market on Sept. 11.

After failing to break to beneath pivotal support etched last Wednesday, natural gas futures rocketed higher Monday as commercial traders greeted the return of hot temperatures, and non-commercial traders rushed to cover shorts. The September contract was the biggest beneficiary of the buying surge, closing 20.4 cents higher at $2.965. Estimated volume across all months was moderate, with an estimated 81,811 contracts changing hands.

Given the nation’s growing appetite for natural gas, especially by the power generation sector, state and local governments are going to have to step up to the plate and play a greater role in the coordination of permitting and environmental-review efforts so that the pipeline and distribution infrastructure needed to support the expanding demand can be built, according to a new joint report.

The mid-$2.60s have been a pivotal level for natural gas futuresover the past year. Last November, the December contract managed totrade up to $2.64 — the high price during the “winter thatwasn’t” — before crashing more than a dollar to February lows.Then in July, many market watchers pointed to the August’s abilityto clear the $2.60 level as a harbinger of things to come. OnWednesday once again a line was drawn in the sand at the $2.65level. If the market stays above that level, we can retest thehighs, bull traders insisted. But a settlement below that levelcould spawn a round of selling, countered market bears.