Seeing how many well funded and ill advised funds lost their asses with the last two draws I find it interesting that a 150 draw would now be what is needed to be bullish. A 120-130 number would be bullish and points towards <850 bcf in storage with normal weather.
DJ. Nymex Natural Gas Futures Continue Retreat In Thin Trade
By Spencer Jakab
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--January natural gas futures prices on the New York
Mercantile Exchange fell Tuesday for the second day in a row after hitting
ten-month highs for a front-month contract last week.
Prices have retreated 6.6% in the past two sessions but remain 37% higher
than where they started the month and nearly a third higher than at the same
time a year ago.
The January natural gas futures contract settled at $6.747 per million
British thermal units, down 20.7 cents.
Following the enormous volatility of the past two weeks, complete with rumors
of commodity funds sustaining heavy losses, traders agree that the market is
now pausing to catch its breath. Turnover and open interest are both light.
This market is behaving like two steps forward, one step back," said Gerry
Saccente, a natural gas trader at ABN Amro in New York. "I think we're in a
bull market that's not over yet."
But others continue to believe that the 46% price spike through last Friday
is hard to justify and that the last two days represent a market that may be
coming to its senses.
"There's no fundamental issue that took us to $7.55/MMBtu," said Mike Schick,
president of Energy Analytics.
A possible catalyst for either deflating the expectations for natural gas
bulls or perpetuating the rally will be Thursday's report by the Energy
Information Administration on natural gas inventories in underground storage.
The last two weeks saw surprisingly large draws relative to expectations and on
a weather-adjusted basis.
"What matters most is where this number comes in Thursday," said Schick.
Expectations seem to be clustering around the range of a 120-130 billion cubic
foot draw.
A third surprise in a row, especially if it is combined with expectations of
cold temperatures, could set a bullish tone. Schick, who has long expected
inventories to be comfortable this heating season, points out that a third
surprise in a row may mean that underlying demand is stronger than expected and
that it would be possible for very cold temperatures to push inventories to
distress levels later in the winter.
"These past two reports, relative to where they should have been, were
enormous draws - if we do see something above 150 Bcf then something happened
in this market."
Although commodity funds had collectively made a bet that prices would fall,
Agbeli Ameko, managing partner of weather and natural gas advisory firm
Enercast.com believes that "a double whammy of cold and a big draw" could bring
them back into the market - on the long side this time.
"The funds are really licking their wounds for now, but they won't be on the
sidelines for long."
The back month futures softened in line with the January contract. February
fell by 20.5 cents to $6.786/MMBtu and March fell by 15.5 cents to
$6.481/MMBtu.
Physical gas prices also softened modestly. Henry Hub traded in a range of
$6.54-$6.65/MMBtu, down a few cents from Monday's level. Deals on Northeastern
hubs remained above $7.10/MMBtu.
-By Spencer Jakab, Dow Jones Newswires; 201-938-4377;
spencer.jakab@dowjones.com |
