Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Stock Market Critical Price Level Could Soon Prompt A Big Move - 25th May 20
Will Powell Decouple Gold from the Stock Market? - 25th May 20
How Muslims Celebrated EID in Lockdown Britain 2020 - UK - 25th May 20
Stock Market Topping Behavior - 24th May 20
Fed Action Accelerates Boom-Bust Cycle; Not A Virus Crisis - 23rd May 20
Gold Silver Miners and Stocks (after a quick drop) Ready to Explode - 23rd May 20
3 Ways to Prepare Financially for Retirement - 23rd May 20
4 Essential Car Trade-In Tips To Get The Best Value - 23rd May 20
Budgie Heaven at Bird Land - 23rd May 20
China’s ‘Two Sessions’ herald Rebound of Economy - 22nd May 20
Signs Of Long Term Devaluation US Real Estate - 22nd May 20
Reading the Tea Leaves of Gold’s Upcoming Move - 22nd May 20
Gold, Silver, Mining Stocks Teeter On The Brink Of A Breakout - 21st May 20
Another Bank Bailout Under Cover of a Virus - 21st May 20
Do No Credit Check Loans Online Instant Approval Options Actually Exist? - 21st May 20
An Eye-Opening Perspective: Emerging Markets and Epidemics - 21st May 20
US Housing Market Covid-19 Crisis - 21st May 20
The Coronavirus Just Hit the “Fast-Forward” Button on These Three Industries - 21st May 20
AMD Zen 3 Ryzen 9 4950x Intel Destroying 24 core 48 thread Processor? - 21st May 20
Dow Stock Market Trend Analysis and Forecast - 20th May 20
The Credit Markets Gave Their Nod to the S&P 500 Upswing - 20th May 20
Where to get proper HGH treatment in USA - 20th May 20
Silver Is Ensured A Prosperous 2020 Thanks To The Fed - 20th May 20
It’s Not Only Palladium That You Better Listen To - 20th May 20
DJIA Stock Market Technical Trend Analysis - 19th May 20
US Real Estate Showing Signs Of Covid19 Collateral Damage - 19th May 20
Gold Stocks Fundamental Indicators - 19th May 20
Why This Wave is Usually a Market Downturn's Most Wicked - 19th May 20
Gold Mining Stocks Flip from Losses to 5x Leveraged Gains! - 19th May 20
Silver Price Begins To Accelerate Higher Faster Than Gold - 19th May 20
Gold Will Soar Soon; World Now Faces 'Monetary Armageddon' - 19th May 20
Gold Mining Stocks Fundamentals - 18th May 20
Why the Largest Cyberattack in History Will Happen Within Six Months - 18th May 20
New AMD Ryzen 4900x and 4950x Zen3 4th Gen Processors Clock Speed and Cores Specs - 18th May 20
Learn How to Play the Violin, Kids Activities and Learning During Lockdown - 18th May 20
The Great Economy Reopening Gamble - 17th May 20
Powell Sends a Message With Love for Gold - 17th May 20
An Economic Renaissance Emerges – Stock Market Look Out Below - 17th May 20
Learn more about the UK Casino Self-exclusion - 17th May 20
Will Stocks Lead the Way Lower for Gold Miners? - 15th May 20
Are Small-Cap Stocks (Russell 2k) Headed For A Double Dip? - 15th May 20
Coronavirus Will Wipe Out These Three Industries for Good - 15th May 20
Gold and Silver: As We Go from Deflation to Hyperinflation - 15th May 20

Market Oracle FREE Newsletter

Coronavirus-stocks-bear-market-2020-analysis

Flash Crash Takes a Bite of Natural Gas

Commodities / Natural Gas Jun 13, 2011 - 02:50 PM GMT

By: EconMatters

Commodities

Best Financial Markets Analysis ArticleAfter infecting the stock market last May and hit the precious metals market, silver in particular, primarily due to raised margin requirement, flash crash has now taken a bite of the natural gas market as well.


FT.com reported that the Nymex (New York Mercantile Exchange) floor had been closed for more than five hours on the evening of Wednesday, June 9 when July natural gas dropped 8.1%, to $4.510 per mmbtu (See Chart). The fall also triggered a 20-second trading pause for the August Henry Hub futures contract.


Natural gas is one of the very few commodities that actually moves more inline with supply and demand fundamentals since it is trapped within the producing region and is not even affected by dollar currency movement that much. Therefore, while there are many geopolitical factors that could explain certain wild swings in crude oil, pretty much none of them could be applied to natural gas.

More curiously, coincidence or not, this flash crash took place in the confluence of the following market events this week, which most likely should encourage the long natural gas trade: 
  • The International Energy Agency (IEA) said on Monday June 6 that it expects global gas demand to overtake coal before 2030, and come close to oil around 2035, and that global gas demand to grow by an average of 2% a year, which will end the current gas glut by 2015, by when demand would begin to outstrip supply.  
  • On Thursday, June 9, Exxon Mobile announced that it bought two privately held natural gas company--Phillips Resources and related company TWP Inc.--for $1.69 billion last week, adding about 317,000 acres for exploration in the Marcellus shale basin.
According to FT, Nymex owner CME Group said the sudden price drop was due to “news of one of the largest oil and natural gas discoveries in the Gulf of Mexico.”  It is true that the flash crash happened hours after the news that Exxon Mobile has made two big new oil discoveries and a natural gas find in the deepwater Gulf of Mexico. Nevertheless, it will probably take a year or more before the new gas discovery comes into production, and traders typically look things at a time horizon of a few months, instead of something so far removed.

At the same time, some market players blamed the overnight drop on computer algo trading, while other says it is a 'fat finger'..... again (probably the same one from last May?), and that there could be another round of inquiry or investigation by the Commodity Futures Trading Commission (CFTC) and the Exchange.   

Henry Hub price has risen 15% in the past month, close to a one-year high of $5 per mBtu, on warmer than usual weather and prospects for future LNG exports.  While fat finger or computerized trading may very well be the cause behind the sudden crash, it looks more like technical profit taking by some big player(s).

Natural gas prices in the U.S. have been stuck in a rut due to ample supplies from the shale gas boom, as a result, many players have increased their short positions on natural gas. According to CFTC, as of May 30, commercial participants, who accounted for 64.7% of open interest, held net short positions, while non-commercial participants, who accounted for 24.5% of open interest, also increased their increased their short positions by 7.1%.

That means, if the same player(s) change their positions, instead of a flash crash, we probably will see a natural gas prices spike by short squeeze.  This is just one characteristic of a modern day  commodity paper palace where a majority of the trades does not take physical delivery.

For now, natural gas for July delivery has recovered and settled up 1.8%, at $4.757 a million British thermal units by Friday, June 10.  Futues rose 1.1% for the week.


Disclosure - No Positions

By EconMatters

http://www.econmatters.com/

The theory of quantum mechanics and Einstein’s theory of relativity (E=mc2) have taught us that matter (yin) and energy (yang) are inter-related and interdependent. This interconnectness of all things is the essense of the concept “yin-yang”, and Einstein’s fundamental equation: matter equals energy. The same theories may be applied to equities and commodity markets.

All things within the markets and macro-economy undergo constant change and transformation, and everything is interconnected. That’s why here at Economic Forecasts & Opinions, we focus on identifying the fundamental theories of cause and effect in the markets to help you achieve a great continuum of portfolio yin-yang equilibrium.

That's why, with a team of analysts, we at EconMatters focus on identifying the fundamental theories of cause and effect in the financial markets that matters to your portfolio.

© 2011 Copyright EconMatters - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Nancy
14 Jun 11, 07:21
Flash Crash Gas

Does anyone ever read what is happening in countries regarding Coal Seam Gas. Public are up in arms about all the damage being done to land, water, air, environment - even in their cities that there is some serious rallies and letter writing, lobbying going on.

Its a gas with some legislative changes may end up being a bit of a fizzer. Greenpeace is also against it. There's also food security issues coming - food for bellies will be more important than food for those material things. Did you read about the 2 Blackpool UK tremors since April 2011 due to Coal Seam Gas?


Rob Rath
15 Jun 11, 17:47
Vanguard Fund/ETF to track Dow Jones Industrial

Nadeem,

Which fund(s) / ETF(s) in Vanguard Funds could one use to track Dow Jones Industrial Average?

Thanks,

Rob Rath


Nadeem_Walayat
15 Jun 11, 19:02
Dow Trading

Hi

I trade Dow futures positions, utilising the likes of IG INDEX.

Best

NW


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules