I dont know how someone says that $XX is to high for NG. At this time of year NG is valued against its alternate fuel #2 oil. The prices between Jan NG and Jan #2 oil contracts are still close.
If the Winter stays slightly warmer than normal as it has been I dont think we will need to see prices go over #2 oil prices to force fuel switching.
NWS reports 200 GW HDD for last week which was very close to normal. This should yield a draw of about 145 bcf.
DJ. Nymex Gas Plummets 9.4% But Traders Stick To Sidelines
By Spencer Jakab
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Natural gas futures prices plummeted by 9.4% Monday on
the New York Mercantile Exchange in extremely thin pre-holiday trade as the
market failed to see evidence of temperatures cold enough to imperil supplies.
Traders pointed to a benign forecast for the rest of the month coupled with
storage levels well above year-ago levels and prices near their highs for the
year.
January futures dropped 65.8 cents to $6.324 per million British thermal
units.
"Being up as high as we were was kind of baseless - it's very difficult to
justify $7.00 gas with the amount of storage we had," said Josh Sadler, a
commodities analyst at Societe Generale in New York.
Although this was the second largest drop so far this year in a front month
contract, it was also the lowest single day volume of the whole year. Market
observers pointed out that traders have been wrapping up positions and are
reluctant to open new ones ahead of options expiration Wednesday, especially
given the unusual overlap with the weekly Energy Information Administration
storage numbers and the five day gap before futures expiration.
"It's trading on very low volume so it's easy to move the market 10 to 15
cents on nothing," said Daryl Dworkin, a gas trader at GFI in New York.
But for those who have argued that prices had reached unsustainable levels,
Monday's selloff was a signal of a possible shift in market sentiment.
"When you see a day like today, this is, in my opinion, reality setting in,"
said Mike Schick, president of Energy Analytics. Prices had soared 46% in the
first two weeks of December to ten-month highs before beginning a retreat last
week.
Schick believes that a price near $7.00/MMBtu, or for that matter above
$6.00/MMBtu, are difficult to justify given the market fundamentals.
"You can only hold it up for so long."
In an indication that the spot market is well-supplied, physical gas was much
weaker Monday. Prices slipped for the benchmark Henry Hub to a range of
$6.07-$6.59/MMBtu from a range of $6.75-$7.00 on Friday. Prices on Northeastern
hubs fell to the low- to mid-$6.00/MMBtu range from the mid to upper
$6.00/MMBtu range Friday.
Back-month futures were also much weaker with February down 63.5 cents to
$6.388/MMBtu and March down 49 cents to $6.033/MMBtu. |
