Weakening

In a sign of coal’s weakening dominance in the power sector, Patriot Coal Corp. and nearly 100 of its affiliates on Monday filed for Chapter 11 protection in U.S. Bankruptcy Court in New York City.

February natural gas reacted to a weakening weather outlook and retreated under $3 again Tuesday. There remains little indication that the storage surplus will stop widening anytime soon, and traders look for continuing weakness. At the close February had fallen 7.0 cents to $2.941 and March had given up 8.0 cents to $2.970. February crude oil rose 93 cents to $102.24/bbl.

It was no mirage that the smaller gains and growth of larger losses in Wednesday’s pricing signaled weakening of this week’s rebound (see Daily GPI, April 14). Only a few scattered instances of flat numbers were left out of an overall downturn in the spot market Thursday. The chillier weather that had sparked a rally at most points from Monday through Wednesday had faded enough to lose its price-boosting ability, and the southern third of the U.S. is not yet hot enough to create compensating power generation demand.

February natural gas futures fell Tuesday as traders factored in a moderate weakening of forecasts calling for near-term cold. Present thinking is that this week’s inventory report is likely to show a huge withdrawal, upwards of 250 Bcf, and any moderation in the weather outlook was thus seen as a reason to temper bullishness. At the close February futures shed 5.5 cents to $4.425 and March eased 4.4 cents to $4.446. February crude oil lost 16 cents to $91.38/bbl.

As expected, the post-holiday rally in cash prices was unable to sustain itself any longer in the face of receding weather-based demand and weakening futures support. Quotes fell at a large majority of points Thursday, although generally by small amounts. A few flat to a little less than a nickel higher locations resulted in mixed price movement overall.

April natural gas futures fell hard in active trading Thursday. Traders responded to data showing a weakening economy and a natural gas storage report that fell in line with expectations but below historical averages. Additionally, quantitative traders pushed prices lower.

Abundant supplies and weakening demand fundamentals have November gas futures trading around $6.70, but U.S. gas would have to get cheaper in order to compete in a liquefied form on the world market, according to Wood Mackenzie’s Ed Kelly.

Abundant supplies and weakening demand fundamentals have November gas futures trading around $6.70, but U.S. gas would have to get cheaper in order to compete in a liquefied form on the world market, according to Wood Mackenzie’s Ed Kelly.

A strengthening U.S. dollar and a weakening oil complex dealt the natural gas futures market a one-two combination Friday, dropping September to a new low of $8.215 for the downmove, which began after August futures peaked at $13.694 on July 2. The prompt month contract finished at $8.248, down 32.3 cents for the session and off a whopping $1.141 for the week. The October contract also took it on the chin, suffering a loss of 32.9 cents and $1.164 for the day and week, respectively, to finish at $8.330.