MARKET WRAP -6 / Crude Oil Weekend Scenario-News
Column Content Index
12/11 14:15 Supply glut, mild weather pressures Canada natural gas
12/11 14:16 Short covering boosts U.S. spot natgas market late
12/11 16:46 NYMEX natural gas ends mixed, fronts finish with gains
12/11 16:23 Closing Commentary - Natural Gas Firmer With Cash Bounce
12/14 02:35 WSC-Canadian Energy Weather
12/11 14:15 Supply glut, mild weather pressures Canada natural gas
NEW YORK, Dec 11 - Excess supply and mild weather continued to erode Canadian spot natural gas prices on Friday, industry sources said.
Day business at Alberta's AECO storage hub fell another nine cents to C$1.92-1.99 per gigajoule (GJ), while January was pegged at C$2.26.
Linepack on NOVA's system was at 12.779 billion cubic feet (bcf) late Thursday, just shy of the target of 13 bcf.
Compressor maintenance on NOVA's system was expected to be completed by Saturday morning, which will send an additional 200 million cubic feet per day of gas into the market, sources said.
Also reflecting an oversupply of gas was today's Canadian Gas Association storage report, which showed stocks were up 0.2 percent last week to 487.32 bcf, or 93.9 percent full. This is compared with 80 percent full a year ago.
After a warmer weekend in western Canada, temperatures in the Calgary area are expected to cool slightly by early next week, with highs forecast in the high-20s Fahrenheit, Weather Services Corp. said.
At Westcoast Energy's Station 2 compressor station, prices fell about nine cents to C$2.20-2.30 per GJ.
At the Sumas/Huntingdon export point, prices were discussed steady to lower at US$1.95-1.98 per million British thermal units (mmBtu).
To the east, prices at Niagara fell another four cents to the mid-US$1.60s per mmBtu, sources said.
12/11 14:16 Short covering boosts U.S. spot natgas market late
NEW YORK, Dec 11 - The U.S. spot natural gas market ended a volatile week with a flurry of short covering shortly before nomination deadlines, causing most prices to end up higher than Thursday's levels, industry sources said.
"It (natural gas market) went down at first, and then it came back up with a vengeance," one Texas-based trader said.
Cash prices at Henry Hub were quoted widely at $1.38-1.70 per mmBtu, with most business seen done in the mid-$1.50s, leaving cash about 30 cents under January futures.
The Midcontinent market similarly started off trading in the low-$1.50s as weak demand and overflowing storage facilities squelched the value out of the market.
By late morning, however, prices on pipelines like Panhandle, NGPL and ANR were up into the high-$1.60s as buyers conserved storage supplies and covered shorts ahead of the weekend.
At the Chicago city-gate, the market ranged anywhere from $1.59 early to as high as $1.79 late, with the bulk of the trades seen near $1.70.
In west Texas, swing Permian Basin prices were quoted at $1.50-1.63, while the San Juan market swung from about $1.43 to $1.60, sources said.
In the New York area, city-gate prices were quoted in the mid-$1.80s to mid-$1.90s. Appalachian prices on Columbia Gas were seen trading mostly in the mid-$1.60s.
Forecasts for early next week showed warmer-than-normal weather continuing in the upper Midwest and northern plains, with temperatures in the Chicago area expected to be five to 10 degrees above normal Monday but a little cooler on Tuesday. In the southern plains, Texas and Northeast, temperatures are expected to hover close to normal, while cooler-than-normal weather was forecast for much of the Southwest.
12/11 16:46 NYMEX natural gas ends mixed, fronts finish with gains
NEW YORK, Dec 11 - NYMEX Hub natural gas futures ended mixed Friday in a sluggish session, with some pre-weekend profit taking and shortcovering lifting the front of the board, while deferred months lost ground, industry sources said. January climbed 1.8 cents to close at $1.858 per million British thermal units after trading today between $1.815 and $1.88. February settled 1.1 cents higher at $1.923. Most other months ended flat to down one cent.
"We saw some shortcovering prompted by a lack of downside momentum, but with the (mild) weather coming in next week, we could see Chicago get to 60 degrees (F)," said one Midwest trader, adding he expected futures to break to the downside Monday unless the forecast changed.
Despite the steady stream of shortcovering today, most agreed sellers would re-emerge next week without some Arctic cold, particularly with stocks 567 bcf, or 22 percent, above last year and likely in the next two weeks to grow further in year-on-year comparisons.
WSC expects temperatures in the Northeast and Mid-Atlantic to average normal to several degrees above-normal through Tuesday. Southeast readings will average two to six degrees below normal for the period. In the Midwest, temperatures are expected to range from three to 12 degrees above normal.
In Texas, much below normal readings Friday and Saturday will moderate to slightly below normal by Tuesday. The Southwest will range from normal to 12 degrees below normal.
Technical traders still pegged January support at Thursday's new contract low of $1.79, which also coincides with a prominent spot continuation low at $1.78. Major buying should emerge at $1.61, which is the spot low for the year. January resistance was seen in the remaining $2.12-2.19 gap, with further selling likely at $2.27 and then at $2.35.
In the cash Friday, Henry Hub weekend quotes on average slipped about a nickel to the mid-$1.50s. Midcon pipes mostly were talked down slightly to the low-to-mid $1.50s. In the West, El Paso Permian was pegged several cents lower in the high-$1.50s.
Gas at the Chicago city gate was talked between $1.60 and $1.75 versus Thursday's average of $1.70, while New York was pegged several cents lower at near the $1.90 level.
The NYMEX 12-month Henry Hub strip inched up 0.1 cent to $2.012. NYMEX total estimated Hub volumes were not available at 1645 EST, but 31,715 lots changed hands as of 1420 EST, well below Thursday's revised tally of 62,327.
12/11 16:23 Closing Commentary - Natural Gas Firmer With Cash Bounce
New York-Dec. 11-FWN--The natural gas futures spent the entire session stuck in a relatively narrow trading range mapped out during the first 45 minutes of trading this morning.
Prices closed slightly higher today but still down about 12 cents from last Friday's close basis January futures. Also, traders noted that this week's range was marked by a higher high and a lower low than sketched out last week. While forming an outside week down, traders said the January futures held key support at $1.80 to finish this week.
Traders said the market was finding support today from both an unexpected steady to firmer close to cash deals today ahead of the weekend and forecasts suggesting a colder period beginning by late next week.
The National Weather Service's 6- to 10-day outlook this afternoon did show mostly normal to below-normal temperatures in most areas of the nation except parts of the Northeast and Atlantic Coast regions. This colder forecast will be closely watched next week for any indication that the cold weather is set to sustain itself or move out like other Canadian cold fronts this season. But traders noted that La Nina weather patterns are marked by great shifts and any signs that it will remain cold may help prices recover in the near term.
"Any rally back up toward $2.05 to $2.12 will be a selling opportunity," commented a Midwest broker today on rallies in January futures.
The natural gas futures opened slightly lower this morning with the early weakness in cash bids. But the futures stabilized as cash prices ran back up and finished slightly firmer, traders said.
One gas manager on the West Coast said that traders needing weekend gas came into the market late to give the cash market a firmer tone than most expected to see. He also pointed to the fact that the Northeast is going to have one of the colder weekends this season and that too may have provided some support to both the cash and futures.
In addition, he noted that while this market has been bearish all season, the futures have never had a big downdraft on a Friday and that could be one reason for the stability today.
However, he said the market still remains fundamentally weak given the record storage situation.
He noted that with 16 weeks left in the heating season, gas withdrawals are going to need to average about 145 bcf in withdrawals per week to reduce stocks to normal levels before the new injection season begins. On average, withdrawals from storage have been about 107 bcf per week, he noted.
A futures broker summed up the action today as a situation where selling pressure has been offset by short-covering activities and some speculative scalpers trying to catch any upside ticks from the long side. However, he emphasized that there is no conviction from the buy side of the market despite the short-term technical signals suggesting an oversold market and some upside potential. However, he said the shorts remain entrenched and unlikely to dump positions given the bearish fundamental posture of the market.
The American Gas Association (AGA) reported gas stocks rose by 27 bcf this past week. This week's rise in stocks marks the second consecutive week of an unprecedented build in storage when stocks are seasonally on the decline. A full month into the end of the storage season and gas stocks are down a mere 23 bcf from the record peak set the week of Nov. 6.
Stocks of gas now total 3,104 bcf, or 95.6% of capacity. That's 567 bcf above last year and 507 bcf above the 4-year average. More important, that is 218 bcf above the stocks on hand during the bearish season of 1994 when spot futures bottomed out in January at $1.25, on traders noted.
12/14 02:35 WSC-Canadian Energy Weather
Source: Weather Services Corporation
SUMMARY- Temperatures 5-15F (3-8C) above normal.
IMPACT- Seasonable cold today with near normal heating demand. Very mild Tuesday-Wednesday with low heating demand once again. Some colder air may return later this week with higher demand.
FORECAST-
48 HOUR...Temperatures near normal today, 10-15F (5-8C) above normal Tuesday.
3 TO 5 DAY...Temperatures 8-14F (4-7C) above normal Wednesday, 1-4F (1-2C) above normal Thursday, 4-8F (2-4C) below normal Friday.
6 TO 10 DAY...Temperatures near to slightly below normal.
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