Cash prices overall were 7 cents higher Monday on average as prices staged a broad rally with only a handful of points in the loss column. Midcontinent, East, and Northeast locations were strong. Futures trading was generally lackluster for the early part of the session, then declined as traders absorbed a survey showing expectations of lower prices next week. At the close November had fallen 16.5 cents to $3.452 and December had slumped 17.9 cents to $3.768. November crude oil slumped $1.32 on its last trading day to $88.73/bbl.
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Seeing a rally in natural gas prices that could push them up to the $3.50 to the low $4 area in the next two to three years, Princeton, NJ-based NRG Energy Inc. senior executives speculated Wednesday that there may be the beginning of a reversal of the ongoing coal-to-gas switch for power generation, particularly in the Texas market in which NRG is the second biggest generator.
Physical gas for weekend and Monday delivery staged a broad rally Friday with overall market gains on average of more than a nickel. Rockies and East Texas points were strong, but most Northeast and Eastern locations were solidly in the win column as well. Futures made it to new highs, giving new life to the bullish case. At the close of futures trading August had risen 8.2 cents to $3.081 and September was 9.5 cents higher at $3.076. August crude oil fell $1.22 to $91.44/bbl.
Wednesday’s minimal gains proved to be an accurate harbinger of a three-day market rally coming to an end. A flat Westcoast Station 2 was the sole exception to falling quotes at all other locations Thursday as the previous day’s 12.7-cent drop by prompt-month futures joined generally pleasant early-fall weather in applying downward pressure to physical gas numbers.
This week’s rally in the cash market appeared ready to pack up its tents and move on as nearly all increases outside the West diminished to about a nickel or less Wednesday. Traders apparently were coming to grips with the realities of relatively little weather-based or industrial load, further fading of storage injection opportunities except in the West, and the continuing lack of tropical storm threats to Gulf of Mexico production expected to last through the rest of the 2011 season.
Not surprisingly, the modest rally of the previous two days came to an end Thursday as generally moderate weather, prior-day futures weakness and a demand-killing hurricane ganged up to cause spot prices to decline across the board.
Prices were in modest rally mode at a large majority of points Wednesday as heat levels began to trend upward again in key northern market areas and what had previously appeared to be a benign tropical wave south of Cuba was designated as Tropical Storm Don in the afternoon as it headed into the Gulf of Mexico.
Hot conditions occupying most of the eastern two-thirds of the United States were unable to keep the overall rally that had begun the week from fading Tuesday. Prior-day futures weakness contributed to the bearish mood, and the return of industrial load from its normal weekend decline obviously was ineffective in propping up the cash market.
It wasn’t a complete upturn, but the hints in the previous day’s market that a lessening of overall weakness might lead to a general rally Thursday came to fruition. Abetted by the May futures increase of 9.2 cents Wednesday and a rather slow easing of cold weather in much of the northern U.S. and Canada, a mixed market saw gains outnumbering losses.
May natural gas futures staged a healthy late-session rally Thursday to close in positive territory after surviving what could have been a damaging blow to the bullish cause after the release of government inventory data. At the end of the day May futures were 3.4 cents higher at $4.389 and June rose 3.2 cents to settle at $4.458. May crude oil vaulted $2.45 to $106.72/bbl.