Prompts

They may have to start handing out seat belts at Nymex justprior to the release of American Gas Association’s weekly gasstorage report each Wednesday. In a span of only a few minutesfollowing the 2 p.m. report of a 65 Bcf injection last week intostorage, September futures spiked to $4.565, its highest levelsince June 28, but then immediately plummeted back into the low$4.40s.

What goes up, must come down,” was one trader’s description ofyesterday’s late sell-off in the natural gas pit at Nymex. However,a more appropriate expression might have been “what can’t keepgoing up, must come down,” because after pressing through stubbornresistance at $3.20 Monday morning, the June contract hadlanguished on either side of $3.20 for two days, unable to attractmuch in the way of follow-through buying. That range-bound tradingcame to an abrupt end Wednesday when fresh storage data wasreleased. The June contact finished down 9.1 cents at $3.126.

Despite a strong showing last Friday and gains seen in nearbyphysical market prices, natural gas futures moved lower after theopening bell yesterday and were never able to recover. The Maycontract was the hardest hit, dropping 5.6 cents to settle at$2.889. By comparison, the 12-month strip sank 3.2 cents to closeat $2.96. Estimated volume was modest, with 48,743 contractschanging hands.

Adding to Monday’s 18-cent price slide the futures marketdribbled lower yesterday as traders factored warming temperaturesinto prices and hunted for sell-stops amid two distinct sellingsurges.

After a strong opening failed to attract the buying necessary tofill the chart gap up to $2.52, the natural gas futures marketsagged Friday, as traders turned once again to the deleteriouseffects of above-normal temperatures in both short and long rangeforecasts.

KN Energy said it will take a fourth quarter charge as 1998earnings will fall short of market expectations due to record warmweather during November and most of December, plus a decline innatural gas processing marginsto about 1 cent, and lowertransportation revenues.

The futures market began the week Tuesday in the same fashion itclosed out last week – probing higher amid a technical bouncesupported by continued apprehension about tropical storm activity.That enabled the October contract to post a gain for its third dayin a row by advancing 9.1 cents to $1.874.

Temperatures that were 15.2% and 2.1% warmer than normal in thefirst and second quarters of the year, respectively, prompted theAmerican Gas Association to significantly scale back its gas demandforecast for the year. The association is projecting a 0.3% decline(0.1 quadrillion Btus -1 quad is roughly equivalent to 1 Tcf) ingas demand in 1998 to 22.6 quads in contrast to its Decemberforecast of 3.1% gas demand growth this year.

Tuesdays and Wednesdays have been quiet lately at the New YorkMercantile Exchange with traders, brokers, and marketers waitingcalmly in anticipation of the weekly AGA storage report. In fact,since the end of April, daily changes to the spot month contract onthose days have been small, averaging slightly more than 3 centswith no change greater than 8 cents. However, this is natural gasand just when you think you have things figured out, it throws youfor a loop. This week, July plummeted on Tuesday to the tune of11.1 cents only to rebound 18.5 cents on Wednesday. That left thespot month at $2.174 at the close of the regular trading sessionWednesday afternoon.