Gas Petrospective – October 14, 2011
Natural gas prices were up 4.2 cents per million Btu yesterday as prices traded both higher and lower in a volatile trading session. At first, quotes dropped to $3.446/mmBtu in response to this week’s EIA underground storage report. This week’s EIA report showed a build of 112 bcf on estimates for a build of 103 bcf. Stocks are 56 bcf lower than a year ago, against a deficit of 31 bcf (-1.62%) a week ago. Against the five-year average, they are now 68 bcf higher (+1.97%), compared to 28 bcf higher (+0.83%) a week ago.
The increase in the surplus against the five-year average is the one that is likely to garner the most interest going forward. But, yesterday, traders were reacting to the size of the build as well as to the changes in the relationship with historical figures. There was no question that the report was bearish, but traders had started reacting to a bearish report a full day before it was ever released. Once the numbers came out, a second wave of selling entered the market, driving quotes to the day’s lows. But, then, there was nothing. The sellers had already done their selling ahead of the report or immediately after it.
Historically, Thursday is the best day for a “fade day.” That is when prices start off moving in one direction – in this case, lower – but then once the buying or selling, as it was in this case, has exhausted itself, prices turn and move in the opposite direction.
Yesterday was a classic fade day. The day’s lows came after a bearish DOE report, prices quickly printed the lows for the day, but then everyone stood around waiting for someone else to sell quotes lower. When it started to become apparent that this fresh selling was not imminent, short-covering and bargain-hunting came in and pushed prices higher. Traders were also buying gas for nearby delivery and selling it in January, looking to make the difference in prices after two or three months; the board is offering free money.
Technical Recap
Natural Gas Options Report
Premium Subscribers (click here to register):
Volumes & Open Interest
End Of Day Straddles
Trade Blotter
Settlements
To view our energy news and articles on your PDA or mobile device, click here.
-----
About FMX: FMX Connect is an information, data, and analytics portal for Commodities. The portal provides an all-in-one package including essential market data, independent third party research, industry news, and commodity trading tools. FMX Connect provides efficient, effective, and thorough data that bridges all aspects of commodities onto one screen. The Result; A user friendly application for hedge fund traders, OTC brokers, individual investors, and industry participants.
-----
Note: The information presented, while from sources generally believed to be reliable, is not guaranteed and may not be complete. FMX | Connect makes no representations or warranties regarding the correctness of any opinions or information. Past results are not necessarily indicative of future results. Nothing in this report should be construed as a representation to buy or sell shares, futures or options, which contain considerable risks. For internal client distribution only. Any reproduction, re-transmission, or distribution of this report without permission is prohibited. Media correspondents or reporters may not quote any one page or section in its entirety and must attribute all quotes, ideas or concepts herein. Copyright FMX | Connect, ©2009-2010. All rights reserved.