Wednesday, January 2, 2013

Algos At Play: Natural Gas Collapses Tuesday Evening, Recovers Somewhat, Producer's Stocks Get Hammered (CHK; COG)

I think I'll just keep repeating this line from December 27:
 We're running at all-time record production levels so any hint that withdrawals from storage will be less than a record results in great fear among longs. Front futures have recovered a bit from their daily lows, currently down 4 cents at $3.32....
Chesapeake is only down 1% but that's probably because it took its lumps last week.
First up, from FinViz:

And from Barron's Stocks to Watch blog:
While the stock market is having a pretty good 2013 so far, there’s one group that’s missing out on the the gains: oil and gas producers.

Cabot Oil & Gas (COG) is the biggest decliner on the Standard & Poor’s 500 index, falling more than 3% so far today. Also down are are shares of Consol Energy (CNX), EQT Corp. (EQT), both down about 3%, and Peabody Energy (BTU), which has lost 2.5%.
The reason for this broad move seems to be the sharp drop in natural gas futures prices, which are down 4.5% today. As Alison Sider writes for Dow Jones Newswires today:
As investors for the moment are spooked by the prospect of a warmer-than-expected winter, “my sense is when natural gas took its run late last year, it was driven by hopes of a really cold winter” and not fundamentals, says Argus’ Phil Weiss.
In particular, according to Bloomberg, it was a research report that’s triggered the latest fears.
Gas dropped as much as 9 percent after Commodity Weather Group LLC in Bethesda, Maryland, said colder-than-average weather in most of the lower-48 states this week would give way to above-normal temperatures from Jan. 7 through Jan. 11. The low in New York on Jan. 9 may be 38 degrees Fahrenheit (3 Celsius), 11 higher than usual, according to AccuWeather Inc.
 I'm not sure why he put Consol and Peabody in there, big coal is down but it's coal.
And from the Wall Street Journal:
Natural-gas futures were sharply lower amid forecasts for warmer weather.

Natural-gas futures for February delivery recently traded at $3.224 a million British thermal units on the New York Mercantile Exchange, down 3.8%.

Gas futures briefly slid to $3.05 in low volume overnight before quickly recovering.
But analysts were anticipating a sharper decline in prices after the latest batch of forecasts point to more temperate weather in January. The mild forecasts for the month follow a warm December that has left the amount of natural gas in storage at 12.8% above the five-year average.

Analysts debated how far natural gas would fall in the coming period due to the mild weather.
"Everyone is upgrading their forecasts to above normal," said Phil Flynn, an analyst at Price Futures Group. "Our thought is that we are going to be back to a situation where we're going to test below $3....MORE