Sam Fletcher
Senior Writer
HOUSTON, Feb. 26 -- The March contract for natural gas surged to a record high of $11.89/Mcf in overnight electronic trading Monday on the New York Mercantile Exchange before stalling in early trading Tuesday at $10.10/Mcf, the previous record set in December 2000.
The contract closed at $9.58/Mcf Tuesday, up 44¢ for the day. "The market opened way up and hit a high of $10.10 early (Tuesday), dropped off as low as $8.60(/Mcf) before finishing the day trading on both sides of $9.50(/Mcf)," said analysts Wednesday at Enerfax Daily.
"The market has gained 67% in the last 7 trading sessions as utilities scrambled to conserve already-low storage, turning to the cash market to meet incremental heating needs," analysts said. "Spot prices on Transco (pipeline pooling point) at the New York city gate rallied more than $10 to $37.50/MMbtu, and Chicago was $2.67 higher at $17.87/MMbtu."
Forecasts this week for another winter storm across much of the nation, longer-term weather predictions for a chilly March, and the drawdown of natural gas storage reserves have steadily pushed the market to new highs over the last 2 weeks. "While the market may be overbought and due for a technical pullback, many said it may have to wait, adding a $9 cash premium to March futures could limit any downside for spot prices ahead of futures expiration (Wednesday)," said Enerfax analysts.
NPRA voices concern
Meanwhile, members of the National Petrochemical & Refiners Association said Tuesday that any political move to encourage use of natural gas "largely for environmental reasons" should be weighed against the financial impact on the US petrochemical industry.
At a hearing on gas supply and prices by the Senate Committee on Energy and Natural Resources, NPRA officials said, "It is essential that lawmakers recognize that US petrochemical producers rely upon natural gas and natural gas liquids as a fuel and feedstock. It follows that gas costs must be reasonable and the supply adequate if we are to maintain a competitive US petrochemical industry."
Increased US demand for natural gas could result in even tighter demand and higher prices, they reminded Senators. NPRA officials called for "a thorough review and analysis of natural gas-related policies and gas supply and demand to maintain both a vibrant US petrochemical industry and US economy."
Oil prices decline
Futures prices for oil and petroleum products declined after US Energy Secretary Spencer Abraham said Tuesday that the government is ready to release emergency oil reserves quickly if Middle East oil supplies are disrupted by war with Iraq (OGJ Online, Feb. 25. 2003). Abraham said the US would make that decision "only in consultation" with the International Energy Agency.
Analysts said it was the administration's first comment on possible release of oil from the Strategic Petroleum Reserve since the latest surge in oil prices began.
The April contract for benchmark US light, sweet crudes lost 42¢ to $36.06/bbl Tuesday on NYMEX, while the May position fell 62¢ to $34.42/bbl. Unleaded gasoline for March delivery plunged 3.97¢ to $1.0078/gal. Heating oil for the same month dropped 2.41¢ to $1.1226/gal.
In London, futures prices for North Sea Brent oil declined Tuesday with profit taking in anticipation of a bearish report later this week on US inventories of oil and petroleum products. The April contract for Brent lost 68¢ to $32.47/bbl on the International Petroleum Exchange, but brokers said the market seemed poised to rally above $33/bbl again.
The March natural gas contact gained 5.5¢ to the equivalent of $2.74/Mcf on IPE.
The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes gained 29¢ to $32.73/bbl Tuesday.
Contact Sam Fletcher at [email protected]
