Gas Petrospective – September 2, 2010

Natural gas prices were back down again yesterday, and it seems that Tuesday’s rally was a lonesome event. On Wednesday, traders and investors returned to the sell side, as they watched Hurricane Earl curling northwards away from major gas producing, gathering and transmission facilities. Without a storm poised to strike at the heart of those installations, accumulated storage and ongoing production remained the central factors in most traders’ thinking.

Economic reports released this week also underlined the lack of industrial consumption over the current and future time frames. The result was a definitive lack of buying interest. Even the ongoing development of tropical risks seemed to fall on deaf ears, as plentiful supplies seemed under any immediate present of coming threat. At this stage in the season, storms seem to curl north before becoming threats to the northern US Gulf, where 11% of the nation’s gas production is centered. We may experience high winds, power outages and heavy rainfall in New England or along the Mid-Atlantic states over the next few days, but no natural gas production or storage is likely to be affected. If anything, cooling rains and wind-induced power outages may reduce demand for natural gas to fire electrical generators.

Of course, with Monday a bank and exchange holiday, traders may decide to cover short positions today and tomorrow … just in case. We have something of a conveyor belt producing tropical storms right now and we are still headed into the heart of the storm season.

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