Noticing continued futures strength and a growing threat of newstorm shut-ins in the Gulf of Mexico, cash prices built onTuesday’s gains with even bigger ones Wednesday. Increases oneither side of 20 cents were common at nearly all points. TheCalifornia market, far removed from Gulf storm influence, sawsmaller gains of about a dime, although a Malin rise of 13 centsnearly fulfilled one source’s prediction of up 20 cents there (seeDaily GPI, Sept. 16) based on Tuesday’s intra-Alberta pricestrength.
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For the second day in a row Tuesday, natural gas futuresreceived a strong boost in prices from short-covering activity dueto tropical storm concerns in the Gulf of Mexico. Earl became thefifth named storm in the 1998 Atlantic hurricane season yesterdaywith sustained winds of 60 miles per hour. As of 5:00 P.M. EST Tuesday, Earl was located 240 miles South Southwest of New Orleansand moving toward the Northeast at 12 mph. The October contractopened strong and wasted little time in trending higher before anafternoon sell-off left the market with a modest 3.4 cent gainbefore the closing bell. Estimated volume was a robust 82,172.
Cash prices finally turned downward Thursday, a day later thanseveral sources had expected. Even with the futures screen staginga modest rally, cash traders were unable to ignore the previous twodays’ weakness in the Nymex pit, the continuing lack of weatherfundamentals and yet another bearish storage report that once againemphasised how close injection demand is getting to disappearing.
Natural gas futures looked poised to continue to trend lowerlast Friday amid abundant physical supply and having justreestablished the downtrend that began on April 8th. However,weather forecasts calling for the warmest temperatures of thesummer and solid “bargain buying” in the cash market was enough tolift August 3.3 cents to settle at $2.165.
Four factors will continue to tighten the future domestic gassupply picture, Randy Mundt, executive vice president of marketingfor producer Burlington Resources, said Tuesday at Ziff EnergyGroups’ New Gas Dynamics 2000+ conference in Houston. The twobiggest factors are producers’ difficulty in replacing productionand accelerated decline rates in the Gulf of Mexico. Also, Mundtsaid, Canadian imports are not an immediate threat to domesticproducers, and the current supply-demand scenario is roughly inbalance.
The May Nymex contract soared to unprecedented heights onTuesday, thanks to an 11.3 cent surge that left the contract at$2.522. May posted a high of $2.53, which is a source said is thetop of a long term technical trading formation. The fact that Maysettled so close to that high price is a bullish sign, he said, andfor that reason, he believes May has a good shot at moving to itsnext resistance level of $2.58 when trading resumes today.