NYMEX gains 17.7 cents after rallying past $3

Saturday, June 09, 2012

After briefly leaping past $3/MMBtu, the NYMEX August gas futures contract settled Wednesday at $2.973, a 17.7-cent gain attributed to hot weather, bullish gas storage projections and temporary outages at several nuclear plants. Cash prices generally moved higher except in the Northeast.

Trading activity experienced a rapid spike mid-morning when the contract shot to $3.02, with volume levels about 20 times higher than the prior minute, according to Gelber & Associates analyst Patrick Saunders. The spike likely was caused by an algorithmic trading strategy "gone wrong," he said.

More than 9,600 contracts were traded that minute, according to Tom Saal, a senior vice president of energy trading with Hencorp Becstone Futures.

Bentek, a unit of Platts, shows Trailblazer capacity at 846,263 Mcf/d. Thirty-day flows have averaged 783,268, Bentek data show.

Trailblazer is a 436-mile pipeline extending from northeast Colorado to Gage County in Nebraska, providing an outlet for Rocky Mountain gas seeking Midwest and East Coast markets. Another force majeure was called last week on the pipeline at a downstream station.

Cheyenne Hub, where gas is delivered into the Trailblazer pipe, averaged in the low $2.50s/MMBtu on the Platts index Wednesday after gaining about 5 cents.

Midcontinent prices rose as much as 5 cents as Oklahoma temperatures are forecast to reach triple digits. Midcontinent demand is expected to remain above 10 Bcf/d, according to Bentek, until a break comes over the weekend.

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