NATURAL GAS / Market Wrap Ending Thursday 12/3/98
Late short cover drives NYMEX natural gas up at close
NYMEX Hub natural gas futures mostly ended higher Thursday in fairly
active trade, as early selling on Wednesday's bearish inventory report
gave way to a late wave of short covering amid cooler forecasts for
next week.
January gained 7.3 cents to close at $1.959 per million British
thermal units after hitting a new low on ACCESS last night of $1.811,
then climbing in the day session to $1.97. February settled seven
cents higher at $2.001. Other months ended flat to up six cents.
''We saw a lot of nervous shorts covering late. There is some (cooler)
weather next week, but it's only normal, and I don't think it's going
to be enough (to sustain a rally),'' said a Midwest trader, adding the
market technically reversed to the upside today, but it was likely to
be short-lived.
While forecasts for cooler weather next week helped spur some short
covering, traders agreed temperatures were only expected to dip to
seasonal levels, not enough to tighten a cash market plagued by
bulging inventories.
In addition, traders said any paper rally will be difficult to sustain
with cash at a 70-cent discount to the screen.
AGA reported Wednesday U.S. gas stocks rose last week by eight bcf,
well outside Reuter poll estimates for a 15-25 bcf draw. Overall
storage stands at 3.077 tcf, or 95 percent of capacity, versus last
year's total of 2.606 tcf, which was 82 percent full.
WSC still expects above to much-above normal temperatures for most of
the U.S. through Monday, with the Midwest climbing to as much as 20-25
degrees F above normal before moderating to about seasonal levels by
Monday. Western readings should range from normal to several degrees
below normal for the period.
The WSC six- to 10-day forecast released late Wednesday calls for
below normal temperatures in north Texas, eastern Oklahoma and Kansas,
much of the central and southern Mississippi Valley and the southern
California coast. Above-normal readings are expected for most of the
East Coast as well as the northern three-quarters of the Pacific Coast
eastward across the Rockies and in the northern and central plains.
Seasonal weather is forecast elsewhere.
While today's chart action looked like a technical reversal, most
agreed January was oversold and due for a short covering bounce after
a 14 percent slide this week. Few expected the upside to be sustained,
with cash still 70 cents below the screen and only seasonal forecasts
ahead.
January support was pegged at last night's contract low of $1.811 hit
on ACCESS, and then at prominent spot continuation lows of $1.78 and
$1.61, which is the spot low for the year.
January resistance was seen first at Monday's gap between $2.06 and
$2.19, then at $2.27 and in the $2.35 area.
In the cash Thursday, Henry Hub swing gas skidded 20 cents to about
$1.20. Midcon pipes were down 15 cents to near the $1.20 level. In the
West, El Paso Permian tumbled almost 20 cents to the low-$1.20s.
Gas at the Chicago city gate also lost 20 cents to about $1.30, while
New York was 15 cents lower in the mid-$1.60s.
The NYMEX 12-month Henry Hub strip gained 2.9 cents to $2.067. NYMEX
said an estimated 87,372 Hub contracts traded today, up from
Wednesday's revised tally of 68,177.
U.S. spot natural gas prices plunge to near $1/mmBtu
U.S. spot natural gas market was gasping for air Thursday as cash
prices plunged to near $1 per mmBtu, industry sources said.
Triggering an early rush to the selling block, sources said, was last
night's American Gas Association storage data, which showed stocks
were up eight bcf last week at 3.077 tcf, or 95 percent full. This is
compared with 2.606 tcf a year ago.
Exacerbating the problem was persisting warmer-than-normal weather
across much of the U.S.
''There's just too much gas out there,'' one Midwest trader said,
adding he expected prices to soften further on Friday ahead of the
weekend.
Early quotes for the weekend at the Henry Hub were seen as low as
$1.05.
Cash prices at Henry Hub for Friday were quoted widely at $1.13-1.26
per mmBtu, with most business reported done near $1.20.
These prices pale in comparison to a year ago when Henry Hub was
trading around $2.50-2.55 and on December 3, 1996, when prices were
$3.40-3.43.
In the Midcontinent, swing prices were also sharply lower near $1.20,
with Chicago city-gate seen trading around $1.30.
In west Texas, swing Permian and San Juan Basin prices were quoted at
$1.18-1.25, while southern California border prices fell to
$1.80-1.86.
In the East, New York city-gate prices were quoted in the $1.60s,
while Appalachian prices were seen trading in the mid-$1.50s.
The six- to 10-day weather forecast from WSC as of Wednesday night
showed below-normal temperatures in north Texas, eastern Oklahoma and
Kansas, much of the central and southern Mississippi Valley and the
southern California coast. Above-normal temperatures are expected to
cover the Mid-Atlantic and southern Atlantic coastal states as well as
the northern three-quarters of the Pacific Coast eastward across the
Rockies and in the northern and central plains. Seasonal weather is
forecast elsewhere.
Canadian natural gas prices down sharply in Alberta
Canadian natural gas spot prices were sharply lower Thursday as
persisting mild weather in the U.S. continued to back gas into the
Canadian provinces, industry sources said.
''Gas is just getting trapped in Alberta. There's just nowhere for the
gas to go,'' one Calgary based trader said.
Prices at Alberta's AECO storage hub fell to about C$1.65-1.70 per
gigajoule (GJ), down about 40 cents from Wednesday and about 80 cents
lower than Wednesday of last week.
These deflated levels have not been seen since early September, a
month when demand is typically low.
Trade at Westcoast Energy's Station 2 compressor was discussed at
C$1.95-2.11 per GJ, down about 10 cents on the day.
Conversely at the Sumas/Huntingdon border point, prices were fairly
steady at US$1.56-1.68 per million British thermal units (mmBtu) due
to demand from California and the Northwest.
To the east, prices at the Niagara export point slumped to US $1.35 -
1.41 per mmBtu, sources said, down nearly 10 cents from Wednesday.
This was amid NYMEX's further erosion in January to another contract
low of $1.811.
Canadian Gas Assoc storage survey - Nov 27th
Canadian Gas Association (CGA) weekly survey of Canadian natural gas
in storage in billion cubic feet (bcf) for the week ended Nov 27:
Pct Full Pct Full
11/27/98 11/20/98 Pct Full Week Ago Year Ago
East 234.04 234.82 96.3 96.6 84.2
West 252.40 254.46 91.5 92.2 81.2
Total Canada 486.44 489.29 93.7 94.3 82.6
East-West division is the Manitoba / Saskatchewan and North Dakota /
Minnesota borders.
East capacity 11/27/98: 243.06 bcf.
11/20/98: 243.06 bcf.
West capacity 11/27/98: 276.02 bcf,
11/20/98: 276.02 bcf.
The Canadian Gas Association survey includes liquefied petroleum gas,
Canadian operators of gas storage and Canadian companies contracting
gas storage in the U.S.
The survey does not include statistics from the 25 bcf Sabine storage
facility in Alberta.
Canadian spot natural gas export prices - December 3rd
EXPORT (DEC SWING) $CDN/GJ $US/MMBTU
HUNTINGDON B.C. 2.28/2.34 1.60/1.65
KINGSGATE B.C. (TO PNW) 2.00/2.07 1.40/1.45
MONCHY SASK 1.14/1.21 N 0.80/0.85 N
EMERSON MAN 1.71/1.78 N 1.20/1.25 N
NIAGARA ONT 1.94/2.01 1.36/1.41
Canada/U.S. dollar conversion based on Bank of Canada rate.
Canadian spot natural gas domestic prices - December 3rd
DOMESTIC (DEC SWING) $CDN/GJ $US/MMBTU
ALBERTA PLANT-GATE 1.53/1.58 1.07/1.11
ALBERTA BORDER - EMPRESS 1.67/1.72 1.17/1.21
STATION 2, B.C. 2.00/2.05 1.40/1.44
SASK. PLANT-GATE 1.53/1.58 1.07/1.11
TORONTO CITY-GATE 1.88/1.95 1.32/1.37
1-YR PCKGS - EMPRESS 2.50/2.55 N 1.75/1.79 N
AECO 1.65/1.70 1.16/1.19
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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