Following a Christmas Day storm that dropped as much as three feet of snow across parts of central New York and despite higher crude oil prices, natural gas futures funneled lower Thursday as traders alleviated overbought conditions and pressured the market to its lowest level in more than two weeks. With that the January contract completed its penultimate trading day at $4.962, down 18.4 cents for the session. January will expire Friday at 2:30 p.m. EST.
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In sympathy with higher crude prices, and as another winter storm approached the Northeast, natural gas futures turned modestly higher in light pre-holiday trading Tuesday. Book squaring was the main feature in the abbreviated session. January closed 3 cents higher at $5.146.
In what was likely the calm before the storm, natural gas prices slid quietly to either side of unchanged Wednesday as traders elected to wait for fresh storage and weather news due out on Thursday. At the closing bell the December contract was 0.7 cents lower at $4.254. Estimated volume was proof of the quiet trading, with only 74,943 contracts changing hands.
R. Skip Horvath, president of the Natural Gas Supply Association (NGSA), said Wednesday that the “calm in today’s natural gas prices” is nothing more than “the low side of our normal business cycle,” with volatility normal and expected in a healthy, competitive market. Horvath, speaking at CERAWeek 2002 in Houston, said the market will continue to see swings, requiring producers to understand both the “depths and heights” to make proper investment decisions.
Buoyed by stronger cash market prices driven by a storm bisecting the country Thursday, natural gas prices floated higher throughout the session as traders cautiously covered short positions initiated in the month-long decline. The March contract finished at $2.138 and by virtue of its 5.8-cent advance secured its third straight up-day. There was less interest in the back months, which limited the 12-month strip to a 1.2-cent gain and $2.518 close. Volume was weak, with 75,990 contracts changing hands.
With all eyes focused on updated weather forecasts and fresh storage data, natural gas traders took a “wait and see” approach Tuesday as light short-covering nudged the prompt contract modestly higher. December finished the session at $2.798, up 6.5 cents for the session and near the top of yesterday’s narrow trading band. A healthy estimated volume of 75,656 was surprising, considering the lack of appreciable price movement.
Saying its overall linepack was low because Tropical Storm Barry had “significantly affected receipt gas” and market area demand was strong, Florida Gas Transmission issued an Overage Alert Day for Monday’s gas day with a 10% tolerance for negative daily imbalances.
Buoyed by follow-through buying on the heels of Wednesday’s late price surge and in reaction to weather forecasts (both for hot temps next week as well as the formation of Tropical Depression 2), natural gas futures shuffled higher for the third session in a row Thursday as short-covering promoted prices to new week-and-a-half highs. At the closing bell, the August contract was knocking on the door of some important technical levels, up 8.6 cents at $3.428.
More than one trader was more than a bit surprised at the price run-up in most markets Tuesday in two-day deals covering the Fourth of July holiday, which normally is considered one of the lowest demand periods of the year. Only Rockies/San Juan/Pacific Northwest points and a few Northeast citygates softened, in contrast with numbers elsewhere that ranged from flat to about 15 cents higher outside California and gains at California points that exceeded half a dollar.