Gas Petrospective – November 3, 2010

Natural gas prices were slightly higher yesterday, gaining 3.8 cents in relatively quiet trading. Colder temperatures, which have been unseasonably brutally cold in the Northeast, gave prices a boost, but traders reminded themselves that there is plenty of supply available in underground storage facilities. This looks like it will be the ongoing debate in this market over the near-term.

On the one side, when we see prices drop, especially if they should fall back to $3.75 or below that, we are likely to get bargain-hunting, short-covering and even end-user hedging. On the other hand, this market has had a great deal of trouble getting above $4.00 or staying above that level. We seem to see good producer selling at that number, and we have to look at $4.00 and higher as an area where we will see hedge selling. Funds are likely to sell in this market if we see prices get up into the $4.25-$4.50 area.

Market observers are not expecting any big moves over the near-term, with bargain-hunting and end-user buying setting up below us, and good selling likely to come in above $4.00 and at every logical increment higher. Production levels are expected to remain high, and a good deal of this market’s identity is likely to be shaped by the amounts injected or pulled from storage each week. This is not a strong market on its own merits. It can only be a strong market if we see healthy amounts pulled to meet space-heating demand. It is brutally cold in southern New England this morning, but it is difficult to tell how that will work itself out in next week’s EIA underground storage data.

 Technical Recap

Natural Gas Options Report

Premium Subscribers (click here to register):

Volumes & Open Interest

End Of Day Straddles

Trade Blotter

Settlements