NG futures

[Dave Grubb]

Extracted from an article in this morning's WSJ:

A wild spike in expiring natural-gas futures contracts on Thursday afternoon was the latest bout of extraordinary volatility that has whipsawed financial markets to start the year.

Natural-gas futures for February delivery settled 46% higher, at $6.256 per million British thermal units, the largest one-day gain on record. More heavily traded futures for March delivery ended the day up 8.1% at $4.363.

Futures for more distant deliveries moved similarly to March contracts in a rise that isn’t unusual for this time of year, when traders wager on the severity of winter weather and the demand it will create for the heating and electricity-generation fuel.

Forecasts monitored by traders on Thursday were revised lower for early February, signaling greater demand beyond the storm that is expected to freeze much of the country this weekend.

At one point, late in the trading session, February futures jumped to nearly $7.35 before crashing back down and rising again to the closing price. Moves throughout the day were so sharp that trading was paused a dozen times by circuit breakers aimed at maintaining orderly trading, exchange operator CME Group Inc. said in a statement.

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“This market worked as designed,” CME said.

The timing and sharpness of the February futures’ spike—and the relatively small number of trades involved—suggests speculators trapped in wrong-way bets on the direction of fuel prices raced to buy futures at the 11th hour to settle trades. Known as a short squeeze, the situation can produce sharp gains with little connection to market fundamentals.

In a note to clients, Ritterbusch & Associates said that speculators clawing out of short positions “accentuated what would normally be a modest price hike.” The oil-and-gas trading firm told clients that it believed prices would fall as winter passed without significant declines in domestic stockpiles and advised them against piling into Thursday’s rally.

The U.S. Energy Information Administration said Thursday that gas stockpiles ended last week nearly 11% lower than last year, though just 1% short of the five-year average inventories.

Little if any of that will ever show up in my check---this is more a game of trading "marbles" than it is of actually buying gas.


It will impact buyers who are buying gas in the spot market---like merchant power generators.

[Sandman]

Some of your earlier posts on the subject influenced my decision to sign a guarantee price agreement with the gas company..

I still feel that it was a good move..

Note: for all y’all that don’t have natural gas .. in todays “unregulated “ natural gas market a user has a transporter, owns pipes and distribution, and a gas supplier, sells gas in the pipe.. the supplier will offer a discount rate for a fixed period but the user is locked in to that supplier for a fixed period.. like internet and cable tv vendors..

[Mike]

You can't shop NG suppliers in Texas. Electricity, yes in most locations.

[Dave Grubb]

You can't shop NG suppliers in Texas. Electricity, yes in most locations.

I think that is the same in PA, although I don't have access to NG so I am not certain of that.

It occasionally, as it does now, seems odd that we sit on NG but can't access it

Plus, above the NG is coal, and all we get from that is a bit of methane in our well water.