HOUSTON (Dow Jones)--The New York Mercantile Exchange June natural gas
futures contract roamed around a 19-cent range, bouncing off support levels and
finishing the session comfortably above $6 per million British thermal units.
Locals took over trading Tuesday, covering short positions at the close as
the Nymex June contract finished just under its $6.09/MMBtu high mark after an
up-and-down gyration similar to Monday.
"It tells you the market is really jittery," said Kyle Cooper of Citigroup
Inc. in Houston. "It doesn't know where it should be or where it should be
assessing value."
With bullish inventory concerns, and bearish short-term weather, the market
led traders into a kind of "wait-and-see situation" that continues to mean a
jittery, choppy market, Cooper said.
The expected summer heat is just beyond the forecasts, and that is boosting
the market's jitters, said Guy Gleichman, a senior trader at U.S. Investment
Group in Hollywood, Fla.
In the meantime, expect the market to take a cue from the petroleum markets
on Wednesday with Department of Energy and American Petroleum Institute
inventory figures being released. Those reports will affect crude - and the gas
market, Cooper said.
Market uncertainty will continue, said Charlie Sanchez of Gelber &
Associates, as the market waits for summer heat to test abilities of marketers
to inject storage gas for next winter.
"We'll see impulse selling and slow erosion as new pricing is uncovered," he
said.
Expect eventually to test $5.65/MMBtu support, said Ed Kennedy of Commercial
Brokerage Corp. in Miami. The market looks oversold, he said, so the contract
may have to go sideways and then rally a tad more first.
On Tuesday, June finished at $6.056/MMBtu, up 4.1 cents. July rose 3.4 cents
to $6.162/MMBtu. Winter contracts rose 2.0 cents to $6.368-$6.453/MMBtu. The
12-month average finished modestly higher at $5.998/MMBtu.
Estimated volume was around 60,000 contracts, compared with total volume of
86,825 on Monday.
June oil futures ended the session at $29.28/barrel, up 45 cents on nervous
buying triggered by reports of terrorist threats against the industry.
Physical gas at the benchmark Henry Hub ended the morning session at
$5.91/MMBtu, finishing inside a $5.89-$6.03/MMBtu range, down 9 cents-27 cents.
First-of-month natural gas index pricing for May at the benchmark Henry Hub
is $5.12/MMBtu, according to Platts Inside FERC's Gas Market Report.
Early predictions for Thursday's Energy Information Administration storage
report are around 80 billion cubic feet up to 95 bcf for the third week of May,
compared with last year's injection of 68 bcf, a three-year average build of 73
bcf and a five-year average build of 77 bcf.
The highest-ever injection for the third week of May was 111 bcf in 2001,
according to EIA figures.
According to Lehman Bros. gas analyst Tom Driscoll, weather normalized
injection rates have strengthened about 2.7 bcf/d more than five-year averages
during the last four weeks.
That could lead to a Nov. 1 storage level of about 2.85 trillion cubic feet,
about 150-350 bcf below what is being called a "comfortable" 3.0-3.2 tcf range,
Driscoll said.
The market needs to shed as much as 2.0 bcf/d of demand. Traders already
point to fertilizer plants abandoning the market, as well as some retail
businesses being hurt by high-end energy costs, thereby pressuring profit
margins as the market moves into what's seen as a high-demand summer.
As of May 9, working gas in storage nationwide was about 900 bcf, about 38%
below the five-year average of 1,442 bcf, the EIA said. Storage in the
producing area is down 47% from the five-year average and in the East, 41%
below its five-year levels. |
