NG up to $7.71 on access.
NY Natural Gas Review: Near-flat After Matching New High Early
Dec. 5-MAR--
By Gloria Gonzalez, BridgeNews
New York--Dec. 5--NYMEX Jan Henry Hub natural gas futures settled down
4.9 cents at $7.384 after matching its new all-time high of $7.950 early
in the session. The market was pressured by moderating forecasts, a
massive sell-off in the crude oil market and long liquidation ahead of
another increase to natural gas margins at Tuesday's close.
* * *
Jan natural gas futures soared more than 5% in early trade Tuesday
amid forecasts for cold weather across the country and concerns about
storage levels, with another sizeable withdrawal expected this week.
However, Jan slipped after matching its new all-time high of $7.950 and
traded in the $7.600 range for most of the session.
"You couldn't get it over the $8.00," one broker said, adding that the
failure to break through that new high instigated the slide.
The market sold off later amid midday forecasts from several private
forecasters that predicted milder temperatures than previous reports
called for. These forecasts put some pressure on the market although
brokers noted that there are differing views of the weather picture for
the next few weeks.
"There's obviously a lot of indecision on how those models shape up,"
one trader said.
Also pressuring the market was NYMEX decision to raise margins on
natural gas futures as of the close of business Tuesday. Clearing members'
margins will rise to $10,000 from $7,500; members to $11,000 from $8,250
and customers to $13,500 from $10,125.
"I think it's the same old story," the trader said. "People don't want
to take length because they have to put money in the margins."
Meanwhile, a significant sell-off in the crude market put additional
pressure on natural gas futures. Crude oil futures plunged again Tuesday,
ending below $30.00 per barrel for the first time in four months on
expectations that Iraqi oil exports would resume shortly and that oil
stocks are sufficient to meet winter demand. Jan crude ended down $1.67,
or 5.4%, at $29.55 a barrel.
In other news, an incident on a Texas natural gas pipeline operated by
a El Paso Field Services has led to the isolation of a section of the
pipeline, according to an El Paso Energy Corp. spokesman. Pipeline
operators are rerouting the flow of gas around the affected pipeline and
the incident is not impacting service to customers, the spokesman said.
Although the cause of the incident has not been determined, El Paso
expects repairs to the affected pipeline section to be completed by the
end of the week, the spokesman said. (Story .19315)
Market sources said it was difficult to tell whether this news had any
impact on trade during Tuesday's session, but noted that the incident may
have instigated some panic buying early in the session.
"I think a lot of people are trading on fear," said Salomon Smith
Barney analyst Kyle Cooper. "The psychological impact is huge because it's
one more thing that gets people scared."
OUTLOOK
Despite the slide from early highs, sources say there is plenty of
room on the upside for another significant rally, particularly if the
forecasts become more conclusively bullish.
"I think you're going to see it back above $7.60 for a while," one
broker said. "After that you take your chances. I still think you need to
be long."
Meanwhile, the American Gas Association is expected to report that
U.S.
natural gas storage levels decreased by about 75 to 100 bcf with a number
in that range seen as neutral, according to a BridgeNews survey of brokers
and analysts. The AGA report will be released after 1400 ET Wednesday.
"You probably need triple digits to maintain it at this level," Cooper
said of current prices.
Last week, the American Gas Association reported U.S. gas storage at
2,502 bcf for the week ended Nov. 24, down 146 from the previous week, and
down 499 from the same period of 1999.
However, several sources indicated that they expect the AGA report to
be overshadowed by the latest weather forecasts. "I think this is pretty
much a weather-driven market," one broker said.
In its latest 6- to 10-day outlook, the National Weather Service said
below-normal temperatures will take place west of a line extending from
the central parts of Lake Michigan, southeastern Illinois, the
southwestern corner of Missouri, central Arkansas and the southeastern
parts of Texas.
Above-normal temperatures will spread eastward of a line extending
from central New York, northwestern Pennsylvania, southeastern Ohio,
eastern Kentucky, east-central Tennessee, northwestern Alabama,
southeastern Mississippi and southeastern Louisiana.
Near-normal temperatures will be found across the remaining areas of
the nation from Dec. 11-15. End |
