Retreat

Adding to losses notched in Monday’s open-outcry session,natural gas futures gapped lower at the open yesterday and neverlooked back, as traders liquidated positions ahead of today’sstorage report. The February contract took the selling squarely onthe chin, tumbling 51.1 cents to close at $6.946. Estimated volumewas weak as only 42,671 contracts changed hands.

This week’s cash market rally apparently was running out ofsteam Wednesday. Eastern points were mostly flat, with a fewNortheast citygates dropping about a nickel. And except forisolated San Juan Basin and Malin gains, the West ranged from flatto more than a dime lower.

After a tumultuous morning rally and retreat, natural gas pickedits way higher yesterday as traders looked past a mixed technicalpicture to focus instead on the possible reemergence of seasonaltemperatures by week’s end. The April contract advanced 2.5 centsto $2.85. However, the real stories were in the out months, whichgalloped higher to post gains of 3.4 cents and 3.5 cents for thesummer and 12-month strips respectively.

The retreat of Northeast citygates from last week’s lofty levelswas still under way Monday, but the rate of decline was slowing.Otherwise, except for softening at Rockies and PacificNorthwest/western Canada points and moderate firmness at Midwestcitygates; flat to slightly lower pricing dominated the west of themarket.

Thursday’s trading confirmed the signs from Wednesday that therecent bullishness in swing prices had reached a peak. Although afew points were flat to 2-3 cents higher Thursday, the majorityfell by several cents, with the greatest weakness occurring in theMidcontinent/Midwest and Southwest markets. Cash anticipated afutures downswing and beat the screen to the punch by starting tosoften earlier, a Midcontinent marketer said, although Nymextraders eventually wound up the day with a small gain.

The cash market was stronger by varying degrees Tuesday withprice movement ranging from flat to about a dime higher. Butsources didn’t expect the firmness to last, since many points wereheading back down along with the screen in late business. Theiroutlook was reinforced when the June futures contract continued todrop in afternoon Access activity.

Cash prices staged a broad-based retreat Monday, giving up 3-5cents at most Eastern points with Western declines tending to belarger at a nickel or more. The market lost some of last week’sfundamental support as a warming trend started to develop in theWest, sources said. In addition, although the Henry Hub futurescontract for May later reversed field and achieved an overall gainfor the day, its weakness in the morning rubbed off on cashtrading.

Lacking any influence from weather or a flat screen, cash pricesranged from flat to down about a nickel Wednesday. Nearly alldeclines were by smaller amounts than the increases that hadpreceded them Tuesday. In one marketer’s view, “Apparently priceswent back down to compensate for Tuesday’s unsupported rise.There’s no weather and no [pipeline capacity] restrictions.”

Cash traders apparently decided to ignore a relatively bearishstorage report, a retreat in Wednesday afternoon’s Access futurestrading and a further small downtick on the screen Thursday.Instead they focused on Wednesday’s jump of almost 20 cents inregular futures business and tried to match it in cash businessThursday-coming close in the cases of Agua Dulce and NGPL-SouthTexas, which both rose about 14 cents. Other points moved up in thevicinity of a dime. Standout exceptions were Malin andintra-Alberta, which managed increases of only a nickel or so. Themildness of the Malin uptick occurred even though PG&E failedto extend Thursday’s OFO.