Rally

A producer was accurate for the most part in predicting a modest rally in the cash market Thursday as a result of the huge recovery from negative territory by May futures the day before (see Daily GPI, April 3). Most points did see gains, with a majority of them in single digits. However, quite a few quotes at scattered locations were flat to down as much as about 20 cents.

October natural gas futures staged a late-session rally Wednesday and finished at the high end of the day’s trading range. October rose 17.6 cents to settle at $5.805, and the November contract added 11.4 cents to finish at $6.690.

With Hurricane Dean continuing to recede as a potential threat to U.S. offshore production, cooling load remaining sparse outside the South and Southwest and a near-dollar plunge by September futures the day before serving as highly negative guidance, the cash market continued to fall by mostly large amounts at all points Tuesday.

With the start of another week of what promises to be widespread extra-hot weather combining with last week’s futures rally being extended by another 23.4 cents Friday, it was hardly surprising that cash prices were up strongly Monday at most points. Further stirrings of tropical activity in the Atlantic, including the formation of Tropical Depression 4, and the return of industrial load from its usual weekend hiatus also lent strength to the cash market.

Despite word that the fourth tropical depression of the Atlantic hurricane season had formed in the far eastern Atlantic, the natural gas futures rally of last week ran out of steam on Monday after encountering resistance just north of $7. The September contract recorded a high on the day of $7.120 before settling at $6.794, down 2.6 cents from Friday’s close.

Reduced cooling load due to cold fronts in both the Northeast and Midwest Thursday made Tuesday’s overall rally a short-lived one. Prices fell at most points Wednesday, generally by moderate amounts in the East but by larger amounts in the West.

Natural gas bulls finally had reason to show their horns with pride Wednesday as a late rally pushed the April contract north of $7 to settle at $7.160, up 25 cents on the day.

Wednesday’s futures increase of nearly a quarter, extending a rally into its fourth day, was the main ingredient in the recipe for rising prices at almost all points Thursday, but a dash of heating load in parts of the northern market areas along with a pinch of remaining cooling load from the western end of the South though the desert Southwest also were part of the mix.

A flat ANR ML-7 was the sole exception to rising cash prices Tuesday. The market was able to continue this week’s overall rally so far despite support from weather fundamentals getting even weaker and neutral screen guidance from Monday. However, one source speculated that last week’s softness late in the week may be drawing out storage buying bargain-hunters and possibly some fuel switchers now that prices are considerably lower than earlier this year.