MARKET WRAP - 3 / Crude Oil Week Ending 12/04/98
NYMEX natural gas mostly ends higher on shortcovering
NYMEX Hub natgas futures, shrugging off reports of cratering weekend
cash prices, mostly ended higher Friday in moderate trade, boosted by
a steady stream of short covering ahead of the weekend, sources said.
January edged up 1.9 cents to close at $1.978 per million British
thermal units after trading between $1.85 and $2.03. February settled
2.3 cents higher at $2.024. Most other months ended flat to up 2.6
cents.
''We settled up today on some nervous shortcovering. People were
afraid to go home short with the (cooler) weather coming, but the
fundamentals are still very bearish,'' said one Midwest trader, noting
Hub cash sold for almost $1.00 below the screen.
Despite forecasts for cooler weather next week, most traders expected
the upside to be limited, noting seasonal or slightly-below seasonal
temperatures were not enough to rally futures much, particularly with
cash well-below the screen and storage a hefty 471 bcf over last
year's levels.
WSC expects East Coast temperatures Friday to climb to as much as 20
degrees F above normal, then gradually moderate to four to 12 degrees
above normal by Tuesday. Much-above normal Midwest readings this
weekend will cool to normal or slightly below normal by Monday and
Tuesday.
In Texas, the mercury will hit eight to 16 degrees above normal Friday
and Saturday, then cool to several degrees below normal Monday and
Tuesday. The Southwest will remain several degrees below normal for
the period.
Technical traders said January's higher close today helped confirm
yesterday's short-term reversal to the upside, but most needed a close
above key resistance at Monday's gap between $2.06 and $2.19 to be
convinced. Further resistance was seen at $2.27 and then in the $2.35
area.
January support was pegged at the contract low of $1.811, and then at
prominent spot continuation lows of $1.78 and $1.61, which is the spot
low for the year.
In the cash Friday, Henry Hub weekend quotes slipped 15 cents to about
$1.05. Midcon pipes were down more than a dime to the $1.03-1.08
range. In the West, El Paso Permian was almost 15 cents lower at
$1.05-1.10.
Gas at the Chicago city gate was talked in a wide range between $1.10
and $1.40 versus yesterday's average of about $1.30, while New York
was 20 cents lower in the $1.40s.
The NYMEX 12-month Henry Hub strip gained 1.1 cents to $2.078. NYMEX
said an estimated 72,807 Hub contracts traded today, down from
Thursday's revised tally of 87,427.
U.S. spot natural gas prices decline below $1/mmBtu
U.S. spot natural gas prices, still shackled by the combination of
unseasonably warm weather across much of the U.S. and bulging storage
inventories, slid another 15 cents on Friday, industry sources said.
Cash prices at Henry Hub for the weekend were quoted mostly in the
low-$1.00 per mmBtu area, down from Thursday's average price of about
$1.20. Deals ranged anywhere from about $0.94 to $1.10, with buying
interest peaking at the end.
The spread between cash and futures continued to widen as NYMEX's
January contract traded at $1.94-1.95 early and as high as $2.02 later
in the session, which was about $1 over cash.
Similarly in the Midcontinent, swing prices were also sharply lower at
$0.95-1.12, with Chicago city-gate seen trading around $1.10 early and
as high as $1.40 late.
''Weather is coming back into the picture. Prices should be up Monday,
but to what degree I don't know,'' one Midwest trader said, noting
storage injections will likely be heavy this weekend.
A number of pipelines, including Texas Eastern and Tennessee, have
issued Operation Flow Orders (OFO) due to the excess supply of gas on
their systems.
In west Texas, swing Permian and San Juan Basin prices were quoted at
$1.00-1.20, while southern California border prices slipped to
$1.70-1.90. Some heating demand from the Northwest helped to support
the market in the West.
In the New York area, where a high of 72 degrees is forecast for
today, city-gate prices were quoted around $1.40. Appalachian prices
were also seen trading near $1.40.
Following a warmer-than-normal week, cooler weather is forecast to
arrive in the Midwest early next week, pushing most temperatures back
to near-normal levels, with highs in the 40s and lows in the mid-20s
to low-30s.
Cooler weather is also forecast for the Mid-Atlantic area over the
weekend and into next week, though temperature highs are still
expected to hover in the low-50s, Weather Services Corp. (WSC) said.
Below-normal temperatures are also expected to linger in the West into
early next week, according to WSC.
Sources argue that a prolonged period of cold is needed to boost the
cash market as most buyers will likely depend on the plentiful supply
of storage gas to meet demand instead of entering the spot market for
short-term purchases.
Forecasters are now calling for a colder second half of December in
the eastern half of the U.S., a trend which may continue into January.
Canadian natural gas prices break down through C$1/GJ
Canadian natural gas spot prices stretched even lower on Friday as
excess gas supply flooded Alberta and no forecasts were on the horizon
for any drastic cold, industry sources said.
The flooding of gas into Alberta from the U.S. export points resulted
in a linepack on NOVA of 13.164 billion cubic feet (bcf) as of
Thursday evening, according to the pipeline company. This is well
above the pipeline target of 12.8 bcf.
''NOVA was still packing this morning. Now they're just trying to sell
that gas into the market. It's supposed to be a little cooler Monday
and Tuesday but another Chinook is supposed to move in by Thursday,''
one Calgary based trader said.
As a result, weekend prices at Alberta's AECO storage hub fell to
about C$0.95 per gigajoule (GJ), down another 70 cents, or about 42
percent from Thursday, before rebounding to as high as C$1.10 by late
morning.
Trade at Westcoast Energy's Station 2 compressor was discussed widely
at C$1.40-1.60 per GJ, down another 55 cents on the day.
Conversely at the Sumas/Huntingdon border point, prices remained
steady at US$1.62-1.68 per million British thermal units (mmBtu) as
northwestern buyers demanded more gas.
Canadian spot natgas export prices - December 4th
EXPORT (DEC SWING) $CDN/GJ $US/MMBTU
HUNTINGDON B.C. 2.31/2.38 1.62/1.67
KINGSGATE B.C. (TO PNW) 1.75/1.83 1.23/1.28
MONCHY SASK 1.07/1.14 N 0.75/0.80 N
EMERSON MAN 1.49/1.55 N 1.03/1.08 N
NIAGARA ONT 1.66/1.73 1.17/1.22
Canada/U.S. dollar conversion based on Bank of Canada rate.
Canadian spot natural gas domestic prices - December 4th
DOMESTIC (DEC SWING) $CDN/GJ $US/MMBTU
ALBERTA PLANT-GATE 0.90/0.95 0.63/0.67
ALBERTA BORDER - EMPRESS 1.03/1.08 0.72/0.76
STATION 2, B.C. 1.45/1.50 1.02/1.05
SASK. PLANT-GATE 0.90/0.95 0.63/0.67
TORONTO CITY-GATE 1.58/1.65 1.11/1.16
1-YR PCKGS - EMPRESS 2.53/2.58 1.77/1.81
AECO 1.02/1.07 0.70/0.75
N=notional. One yr package beginning Nov. 1, 1999.
Canada/U.S. dollar conversion based on Bank of Canada noon rate.
One year packages converted to U.S. dollars at a 12-month forward
rate.
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