Natural Gas Out of Control SmallCapCenter.com (Bridge News)

December 06, 2000

N atural gas futures blasted through $8 on the New York Mercantile Exchange this morning, climbing as high as $8.80 per thousand cubic feet - prompting at least one trader to tell Dow Jones News Services the market is "out of control."

The January New York Mercantile Exchange natural gas futures contract set a new record high of $8.80 per million British thermal units on Wednesday, up more than $1.40.

New contract highs were also posted for February-May 2001.

Traders expect the Nymex to set trading limits at $1.50/MMBtu. Immediate confirmation from the Nymex was unobtainable despite repeated calls.

At 9:44 a.m. EST, the January contract was trading around $8.55/MMBtu, up $1.166/MMBtu from Tuesday's record high $7.384 settlement.

New cold weather forecasts are driving the prices, pressing peak demand. Bullish indications of a large storage draw from the American Gas Association this afternoon are also a factor.

If the $1.50 trading limit is breached, then the Nymex is expected to stop trading. When trading resumes, one trader said he expected to see selling bring the contract back down.

"This market's out of control," Tom Saal of Pioneer Futures Inc. told Dow Jones. He sees a "massive, backwardated market."

On Tuesday, the Nymex raised margins on its Henry Hub natural gas contract to $10,000 from $7,500 for clearing members; to $11,000 from $8,250 for members and up to $13,500 from $10,125 for customers.

It's the third time in less than two weeks the exchange has raised margins, making it much more expensive to trade.

"You have to stay aboard this train," said one Houston trader told Dow Jones. Overnight rallying has carried prices well above the $8.00 per million British Thermal Units level "and should prompt the day session to do the same," he said.

Early AGA predictions are for a draw of about 90 billion cubic feet in this afternoon's AGA report, following the pattern of large draws at the beginning of the winter heating season. another bullish signal.

http://denver.petroleumplace.com/egatecom/scream/2000/12/06/eng-smallcapcenter/eng-smallcapcenter_124033_18_9016071846709.html

-- Martin Thompson (mthom1927@aol.com), December 07, 2000