Tone

After extending as high as $3.14 in early morning over-the-counter Access trade, natural gas futures tumbled lower Thursday as fresh longs headed for the exits ahead of what is shaping up to be a volatile options expiration today. The November contract opened at $3.05, but came under heavy selling pressure about mid-morning Thursday after it was evident the contract had no chance of rebounding to levels seen hours earlier in the computer-only Access trading session. November finished the day at $2.938, more than 20 cents off its Access high but down only 4.3 cents for the session.

A diving screen set a softer tone for most points Monday in eastern swing markets. Anticipation of another AGA storage injection report in the vicinity of 100 Bcf contributed to bearish feelings. However, most of the eastern downturns were fairly mild at about 15 cents or less, and much of the West was climbing back up strongly from the price depths seen in Friday’s trading for the weekend.

California’s energy crisis has become more of an energy war, with public comments from all sides taking on distinctly adversarial tones. Gov. Gray Davis’ current strategy is to go after merchant generators in the news media and legislative forums. At the same time the governor has become the Democratic Party point person, attacking the Bush Administration on its energy policy as it relates to the western states and sky-high wholesale natural gas and electricity prices.

The overall tone of the cash market remained flat Thursday, buta growing number of points were recording tiny decreases. Thetouches of softness came even as an eastbound cold front reachedthe nation’s midsection, reminding regions that had beenexperiencing record seasonal warmth recently that winter isn’tquite over yet. One source speculated that prices may be finallystarting to crack under the strain of having maintained theirpositions during a long period of no fundamentals support. Even thearrival of some for-real weather fundamentals may not be enough toprovide support, he said.