Will NYSEG pass along this lower price to their customers?
Too bad NYSEG can't give us just a 9% increase in customer service satisfaction.
Gas May Drop From Seven-Year Low to Less Than $2, Options Show
By Reg Curren and Dinakar Sethuraman
Sept. 4 (Bloomberg) -- Natural gas futures are poised to fall further after trading at the lowest in seven years in New York as stockpiles grew to a record for this time of year, according to options data and analysts. The cleaner-burning fuel, down 56 percent this year, may plunge another 20 percent to below $2
per million British thermal units as new liquefied natural gas supplies come on stream, said Tony Regan, a consultant for Singapore-based Tri- Zen International. Trading of bearish options on the U.S. Natural Gas Fund rose to a record as investors bet that the exchange-traded fund tracking gas futures will keep tumbling.
“I would not touch that market until I see a $1 handle in the next month,” Jonathan Kornafel, a director for Asia at options traders Hudson Capital Energy. “The fundamentals are just too strongly bearish for this thing to turn around.”
Natural gas for October delivery fell 0.3 percent to $2.501 per million British thermal units at 10:10 a.m. Singapore time on the New York Mercantile Exchange. The contract declined 7.6 percent yesterday to settle at $2.508, the lowest close since March 5, 2002.
Supplies of gas rose 65 billion cubic feet in the week ended Aug. 28 to 3.323 trillion cubic feet, the Energy Department said. Inventories are the highest for that week since the department began publishing data in 1993. New LNG projects in Qatar, Yemen and Indonesia, which may reach capacity in 2010, coupled with weak Asian demand may send supplies to the U.S.
Volume for puts, giving the right to sell the ETF, rose yesterday to 220,165 contracts, or 2.6 times the four-week average, as options traders bought the contracts to protect from a further drop if the fund extends its 61 percent slide this year. Puts traded 1.4 times more than calls, which give the right to buy the shares.
“LNG is going to put further downward pressure on Henry Hub,” Regan, who formerly worked for Royal Dutch Shell Plc, said in an interview. “We could go lower than $2, it hasn’t finished yet.” Demand hasn’t increased in Europe, and U.S. domestic output has been higher than expected, which will put further pressure on Henry Hub, the U.S. gas benchmark, he said.
Overall U.S. gas consumption may contract by 2.6 percent as the recession that began in December 2007 cuts demand, the Energy Department said in its monthly Short-Term Energy Outlook on Aug. 11.
Gas use at factories is forecast to tumble 8.6 percent this year because of the recession, the department said. Stockpiles typically gained 64 billion cubic feet for the period in the past five years.
“We’re well supplied and there’s so little demand,” said Michael Rose, director of trading at Angus Jackson Inc. in Fort Lauderdale, Florida. “Some people are starting to question the economic recovery and that adds more pressure to gas.”
Natural gas for delivery in January settled at $4.819 per million Btu, a premium of about $2.311 to October futures. When prices for future delivery are higher than near-month contracts it’s a situation known as contango, which typically encourages companies to put supplies in storage now for use later.
October 2009 $3 call options were the most active natural gas options yesterday, based on Nymex electronic trading data as of 3:31 p.m. They fell 7.5 cents to 8 cents.
October 2009 $2 puts, the second-most active, rose 1.8 cents to 5.2 cents and were followed by the $2.50 puts, which gained 6.9 cents to 23 cents.
The $2 put, which became available on March 11, was trading at its highest price ever yesterday and has risen from a contract low of 0.8 cent reached on Aug. 6 as futures declined 33 percent.
“We’re getting to the point where people are starting to worry about where they’re going to put gas and what that entails for the market,” said Brad Florer, a trader at Kottke Associates Inc., a commodity futures broker in Louisville, Kentucky. “If they have to take gas to market, instead of putting it in storage, the front end of the curve will continue to get whacked.”
Peak natural gas storage capacity rose 100 billion cubic feet to an estimated 3.889 trillion cubic feet as of April as operators expanded to meet rising production, according to an Energy Department report on Aug. 31.
The previous high for storage is 3.545 trillion cubic feet, reached on Nov. 2, 2007, according to the department.
“The physical aspect of the commodity is becoming a problem, unless some demand comes on quickly or we get some weather that changes things,” said Florer. “As long as those things remain constant, like they have for months now, then I don’t think the bulls have much to hang their hats on any time soon.”