DJ Nymex Jan Natural Gas Futures Fall; Bearish AGA Report
HOUSTON (Dow Jones)--The New York Mercantile Exchange natural gas futures contract dipped into the high $2.50s per million British thermal units Wednesday, sold downward on the shallowest withdrawal ever reported for mid-December by the American Gas Association.
The AGA said only 45 billion cubic feet of gas was drawn from storage last week, well below industry expectations of 50-70 Bcf. It was also the smallest draw since 1998, when prices fell below $2/MMBtu.
January settled at $2.616/MMBtu, down 4.1 cents. February fell 6.2 cents to $2.65/MMBtu.
"That's bearish," said Kyle Cooper of Salomon Smith Barney in Houston of Wednesday's AGA report, which was released barely five minutes before the close of trading.
The report should send prices well below $2.50/MMBtu, he said. More selling was expected Wednesday, but the AGA report was released with only five to seven minutes left to trade, traders said, effectively blocking any further selling..
From 2 p.m. to 2:25 p.m. EDT, when the AGA report was finally released because of a computer server breakdown, the bears won the battle of anxiety, said Tom Saal of Pioneer Futures Inc. in Miami, who'd predicted a draw of only 30 Bcf.
More selling should come Thursday, Saal said.
"Sooner or later the market should move into backwardation (cash prices trading higher than futures)," he said. That's a type of market associated with large seasonal withdrawals, he said. In the meantime, another day of anticipated winter cold fled the market.
Looking ahead, expect weaker prices to continue into January's expiration next Thursday, traders said. Some seasonal cold is in next week's forecasts, one trader said, adding that it comes and goes quickly.
Traders expect to see even lower demand as the year folds into 2002, because industries close down operations for the holiday season. Once utilities begin pulling from storage, the physical gas market should see prices fall swiftly as that gas enters a low-demand market.
A year ago, January was trading around $9.10-$9.32/MMBtu on short storage supply and an early, bitterly cold, winter. The market hit $10.10/MMBtu on Dec. 27 a year ago. January 2002 expires on that day this year.
On Wednesday, an estimated 69,000 contracts traded, about one-third spreads or hedge trades. The 12-month strip finished around $2.804/MMBtu, down 5.3 cents.
Physical gas at the Henry Hub ended in a $2.54-$2.67/MMBtu closing range, up 6 cents-10 cents, in convergence with the Nymex board.
-By John Edmiston; Dow Jones Newswires, 713-547-9209 john.edmiston@dowjones.com
(END) Dow Jones Newswires 19-12-01
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