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80 comments on A little more illustrative info on Russia

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davebygolly on February 10, 2006 - 11:50am Permalink | Subthread | Parent | Comments top
Yes, the whole situation with gas this winter is something I don't understand either. Everything I read lead me to fear that the situation was going to be a lot worse than it turned out--even taking into account the mild winter.

I'd love to see a discussion of that.

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Stoneleigh on February 10, 2006 - 12:02pm Permalink | Subthread | Parent | Comments top
My suggestion would be that speculators were driving up NG prices in anticipation of exactly the situation you were expecting (betting on the consensus - lemming alert). They lost the bet when the mild weather resulted in lower than expected demand. Speculation drives price volatility in tight markets.
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creg on February 10, 2006 - 4:35pm Permalink | Subthread | Parent | Comments top
http://www.netcastdaily.com/fsnewshour.htm    

Other Voices: G. Michael Bolser  He maintains that the NG prices have been so weird that he believes there has been central bank kinds of interventions. He has a web business @ interventionalanalysis.com  trying to find indicators of gov/banking meddling, and maintains this is especially true with precious metals.  Could this be?

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Agric on February 12, 2006 - 9:20pm Permalink | Subthread | Parent | Comments top
Yes, they do meddle. Mostly very successfully / effectively - it doesn't often make profitable sense to bet in the marketsagainst people with bottomless pockets.

There is plenty of evidence of manipulation of gold prices, just hunt around the gold sites and you'll find opinion and some hard evidence. There is circumstantial evidence they intervened in oil markets when the Katrina spike hit, probably mostly to get their proxies out of a short hole. I know almost nothing about NG trades so won't comment on that. They are occasionally active on stocks to prevent significant falls. It's why they are known as the PPT (plunge protection team).

But the effects are much greater than their intervention. Just the awareness that the PPT may meddle changes market behavior quite significantly - it knows the risk in the 'bad' direction is more limited than in a 'true' market. 'Problems' will occur, however, should the PPT or whatever fail to hold the line, then the market may take real control and perhaps over-react.

The recent price breakout in gold may be an example. It's now about 20% higher than a few months back, the move happened quite fast, the 'controllers' didn't have the bullets to stop it so had to stand back and let it rip. They will be intervening already or soon, the price may drop back to $500 or even lower, then another upwards wave will force the price higher. Spotting that moment could be lucrative, getting it wrong, costly. I'd be looking to late March as a buying time for gold unless geopolitics intervene, I'd be selling just now.

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unplanner on February 10, 2006 - 12:04pm Permalink | Subthread | Parent | Comments top
The mild winter really had to have helped out. What I am wondering is how much demad was destroyed out of profit (companies selling their nat gas at inflated prices and shutting down temporarily), out anticipation (efficiency measures) or fear (just plain shutting down an already failing business before debts get worse).
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Leanan on February 10, 2006 - 12:05pm Permalink | Subthread | Parent | Comments top
The winter was insanely mild.  

Warm January saved winter gas supply

Here in the northeast, the weather has been so warm it's a scary.  The pear tree outside my window budded in January.  I think it's close to blossoming - or would be, if a nor'easter weren't blowing in this weekend.  

The warm weather is not all good news.  It means not much snow pack, which might mean drought this summer.  And if the summer is also unusually warm, we'll be using up natural gas for air conditioning.

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Donal on February 10, 2006 - 3:01pm Permalink | Subthread | Parent | Comments top
There's some sort of saying, "Warm in Winter means a full graveyard come Spring."
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kjmclark on February 10, 2006 - 12:28pm Permalink | Subthread | Parent | Comments top
I've of heard of at least five reasons that gas prices are down:

1. January was one of the warmest Januarys on record for much of the midwest and northeast. This pulled the rug out from under demand and allowed inventories to build.

2. The fall was dryer than usual in many grain growing areas, requiring less gas than usual to dry the crop for storage.

3. Some heavy industrial users of gas cut back their use because of the high prices. Supposedly fertilizer manufacturers, chemical companies, and some plastics manufacturers have cut back significantly. There have been some accounts of these companies selling their gas from forward contracts back into the spot market to make money.

4. Insulation and wood stove sales have been unusually high. Lots of people are getting the message and conserving in various ways.

5. Production is slowly coming back on line in the GOM.

The trend is probably still intact

but we dodged a bullet with the near record warm January. Next year we get to try our hand at dodging another bullet!

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OilTrader on February 10, 2006 - 6:22pm Permalink | Subthread | Parent | Comments top
Also,

Natural Gas futures usually follow a seasonal pattern of bottoming around mid-February.  It is very consistent pattern.

...hopefully it will occur this year too since I just started nibbling long on NG... :)

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jkissing on February 10, 2006 - 11:06pm Permalink | Subthread | Parent | Comments top
High prices caused demand destruction by anybody who could avoid or delay consumption, plus swithching to oil by those utilities with that capacity.
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