DJ Nymex Gas Ends 8.4% Higher As Traders Look Past EIA Report
NEW YORK (Dow Jones)--Natural gas futures on the New York Mercantile Exchange
rallied sharply Thursday despite a closely watched government storage report a
half hour after the market open that was, on face value, neutral to slightly
bearish.
February natural gas futures settled 50.2 cents, or 8.4%, higher at $6.445
per million British thermal units, moving as high as $6.52/MMBtu during the
session. Initial price strength prior to the report was attributed to the oil
market, but natural gas took the leading role soon after the report. Crude oil
futures settled $1.67 a barrel higher at $48.04, up 3.6%.
Traders and analysts struggled to explain the gas market's bullish response
to the Energy Information Administration's storage report that showed only an
88 billion cubic foot draw from storage versus a market consensus of 96 Bcf
according to a Dow Jones Newswires survey. Some pointed to an auction of
options that implied a lower draw of just 80 Bcf, but even this would do little
to explain an 8% price surge.
"Expectations and the way the market reacts are not always correlated," said
Mike Schick, president of natural gas consulting firm Energy Analytics.
Some traders said that the report simply served as an excuse to focus on
other short-term factors such as an upcoming cold snap that is the most severe
so far of the heating season and the highest level of net short interest in gas
futures in over a year - a factor that can lend a boost to any rally.
"Overall, I don't think it's that bullish of a number, but the market's just
so short and you do have that cold weather coming in," said Kyle Cooper, an
energy analyst at Citigroup.
The storage report saw the level of surplus gas in underground storage expand
versus the five-year average and makes it more likely that the amount of gas in
the ground will exceed 1,200 Bcf on April 1, the official end of the heating
season. This is seen as a safe level and should allow prices to moderate.
"The most important factor is where the storage total ends up on April 1 and
November 1," said Schick.
Meanwhile, cash prices at the benchmark Henry Hub rose as high as $6.25 per
million British thermal units versus a high of $5.99/MMBtu Wednesday.
Northeastern hubs saw sharper gains, probably in response to the imminent cold
snap. Deals on Transcontinental Zone 6 near New York were as high as
$7.05/MMBtu versus a high of $6.49/MMBtu Wednesday.
-By Spencer Jakab, Dow Jones Newswires; 201-938-4377;
spencer.jakab@dowjones.com
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Unbelievable how much speculators are messing up the commodities markets. Any gas producer that doesn't hedge at this point is crazy. I thought there used to be fairly narrow limits that a commodity could go up or down in any one day, whatever happened to that? |
