Natural Gas Price - Dec 19

[dan_s]

I got this late yesterday from an EPG member. It is cut from the BMO Capital Markets report:
News of Blackstone pulling investor funds from the commodities hedge fund Madava Asset Management broke in the WSJ over the weekend and brought some relief to natural gas markets that have been punished over the first two weeks of December. The process of unwinding the fund’s $800mm in assets has likely contributed to the pressure at the front end of the curve, which we have continued to say could be overdone given the broader fundamental picture. Weather forecasts for the 12/22 gas week held very cold patterns in the eastern two-thirds of the lower 48 with GWHDD’s at a 55 point premium to the 10-year average for the week in this afternoon’s models. The fact that this cold blast held in key demand points in the Northeast and Midwest is encouraging given the recent trend of forecasts warming as we get close to the actual dates. Western basis markets moved tighter today as above average temperature forecasts in the Rockies and along the West Coast cooled towards levels in line with seasonal averages. With all of that said, total demand fell below 100 bcf/d over the weekend and dry gas production reached a new all-time high at 77.4 bcf/d on Saturday. Only time will tell if today’s bullish momentum is a flash in the pan or the first step in a real rebound of winter prices.

NYMEX futures for natural gas are not as heavily traded as the NYMEX crude oil futures. It is possible that one large fund unwinding long positions could have a significant impact on the price of the front month contract, which in turn could pull down the entire strip.