Gas Petrospective – September 28, 2010
Natural gas prices dropped more than eight cents per million Btu yesterday, and traders were recalculating how much natural gas they expect to enter the heating season with, if we do not have any disruptions between now and November 1st, when the heating season officially starts. We have had a lot of wind on the water, but it has had a minimal impact on production, gathering and distribution facilities this tropical storm season (which overlaps heating season during the month of November). At this stage, the picture is relatively clear of storm activity.
Yesterday’s settlement level was the lowest final price since September 9th, Dow Jones reported yesterday in its natural gas roundup. Prices have been on a see-saw, riding up and down, but they have had a difficult time sustaining themselves over $4.00/mmBtu.
Even after a summer of decent withdrawals, we still have 195 bcf and 6.20% more than the five-year average for this time of year, and we also have 37% more rigs in service now than we had a year ago. Those figures make it very hard for traders to pull away from prices below the magical $4.00 level. The large number of storms seen recently has kept the bears on the defensive, but that may be changing as we start this new week. We also need to be on the watch for funds selling this market, again.
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