Bottom line, nothing changed, i.e. you can’t swing a cat without hitting a molecule of gas in the U.S. In this vein, yesterday’s reaction to the EIA reporton the NYMEX is not difficult to reconcile.
As of last night you could have purchased the last NYMEX contract of the refill season, Oct-09, at just 86 cents on the dollar to the Nov-09. You could have also purchased the entire 2009/10 winter at just 94 cents on the dollar to next summer’s refill season.
In other words, the market is showing no concern regarding the supply/demand curve for this summer and next winter. With 2.1 Tcf already in the ground… it’s not hard to figure out why.
As we look ahead to next Thursday’s report, the typical injection is 110 Bcf. Last year the EIA reported an 87 Bcf injection for the corresponding week (23-May-08). Nationwide implied weather demand this weekhas been mixed, i.e. key markets in the Houston area are running right around 40% below normal (vis-à-vis degree days). In the East, New York City weather related demand has been slightly above normal.
NYMEX crude oil closed lower yesterday for the first time this week. However, if you are bearish, yesterday’s price path was not inspiring. Overnight bearish thrust stalled by mid-morning and the market rallied 2%, on heavy volume off its intraday lows into the close. With a three-day weekend ahead of us, it is not going to take much to scare weak bears.
London crude dropped sharply in early ICE session trading (-2%), but bearish momentum stalled 7 cents shy of Wednesday’s 58.76 low print. Afternoon bids slowly appeared, but bulls ran out of steam into the close. Brent’s discount to New York shrank from $1.45 on Wednesday to $1.12.
Stephen Schork is the Editor of, "The Schork Report"and has more than 17 years experience in physical commodity and derivatives trading, risk systems modeling and structured commodity finance.