Tumble

The gas market never ceases to amaze observers, but the Jan. 12-16 period could go down as among the more bizarre situations on the books, with record cash prices and gas demand in the Northeast and plummeting near-month futures. Over the last five trading days, the futures market lost $1.35 in value, or about 19%, since the close on Jan. 9, despite what many would consider very bullish fundamentals.

Despite a bullish storage report (111 Bcf withdrawal) and a corresponding price spike at mid-morning, the natural gas futures market dropped lower for the third session in a row Thursday. While bulls still have plenty of ammunition left at their disposal, Thursday’s price action was a strong endorsement for the bears and traders look for modest softness ahead of the weekend.

Pulled down by another in a string of bearish weather outlooks, the natural gas futures market shifted back to the downside Wednesday, rescinding a majority of the gains notched in Tuesday’s session. Caution ahead of Thursday’s release of fresh storage data also contributed to the price decline, with weak longs electing to cash out on Tuesday’s gains ahead of the inventory report.

While overall natural gas imports into the United States dropped slightly in the first half of the year, imports of liquefied natural gas (LNG) more than doubled during the period, according to figures released by the Department of Energy (DOE) last Thursday.

While overall natural gas imports into the United States dropped slightly in the first half of the year, imports of liquefied natural gas (LNG) more than doubled during the period, according to figures released by the Department of Energy (DOE) Thursday.

Gulf of Mexico gas production was slowly beginning to return to normal on Wednesday but 2.2 Bcf/d of gas remained shut in, according to the Minerals Management Service. Despite the supply issues, however, a sharp drop in gas futures prices well below psychological support at $5 sent cash prices tumbling 5-20 cents across the board.

Citing dampened utility results mostly from a planned nuclear plant refueling, Rosemead, CA-based Edison International Wednesday reported first-quarter results that were down 34% compared with the same period last year (17 cents/share, compared with 26 cents/share for the first quarter, 2002). The utility holding company for Southern California Edison Co. said the results might have been worse without improved performance in its merchant energy sector.

Nobody got faked out by the semi-pause Thursday in last week’s headlong price tumble. As NGI sources had predicted, softening resumed Friday with a vengeance. Except for flat to only moderately lower numbers in the Rockies, prices tended to slump between about 40 cents and nearly $1.80. Most losses were in the range of 50-80 cents.

After tumbling $3.42 from their $8.50 high on Feb. 28 with only one up-day, April futures finally found a bottom at $5.08 and bounced higher. The contract appeared to be headed for another large drop on Friday morning, opening the day with a sharp move to the downside. But at about 10:40 a.m. buying suddenly kicked in on oversold conditions and by the end of the day, April was up 6.9 cents at $5.430, not far from its daily high of $5.480.