Gas Petrospective – September 7, 2010

Natural gas prices rallied 18.8 cents per million Btu on Friday, and needed all of it to finish the week with a gain of 23.4 cents. Prices had been under selling pressure for weeks and they were oversold enough to settle higher on three of the five trading days for the week. It had been a long time since that was the case over any week. One would have needed to return to late July to see a week during which prices had been higher for a majority of the days during the week.

Traders covered short positions going into the long holiday weekend, with Earl comfortably on its way out into the Atlantic – but with a number of tropical conditions ripe for further storm development as traders went home for the Labor Day Weekend. The fear was that we might return to a fully-developed Fiona or Gaston and that one or both could be headed towards gas-producing, gathering or distribution facilities. After waiting all summer for a legitimate storm threat going into a weekend, Friday’s activity provided all the needed elements.

Of course, without any major threats as we start this new week, we should expect to see selling return. There is a disturbance over the west African coast, but it is not yet a named storm. Nor are Fiona or Gaston looking likely to pose serious threats. Hermine has developed suddenly but without much punch; its greatest threat comes from accompanying rains. Temperatures will warm again by tomorrow in the Northeast, but they will be temperate in the Great Lakes and normal through much of the South.

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