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After Shaky Start, Futures Able to Bubble Higher

After Shaky Start, Futures Able to Bubble Higher

After see-sawing 2 cents on either side of unchanged for much of the Nymex trading session yesterday, the futures market rumbled higher late in the day to finish near its high. The June contract finished up 2.9 cents at $2.302, which places it squarely in the middle of its recent $2.205-$2.405 trading range. Estimated volume was a relatively light 32,280.

"Apprehensive" was how one Houston trader described yesterday's futures market following Friday's release of fresh Commitments of Traders (COT) data. The Commodity Futures Trading Commission (CFTC) reported non-commercial net speculative long positions grew almost 15,000 to 48,029 since the report was released Friday, April 23. "[Monday] was a key day to qualify the digestion of the COT data," he continued. "Buyers were very tentative at the outset of trading because they feared the powers that be would try to push the market lower. Once they realized there would not be a huge sell-off, they bid the market higher into the close." Despite the speculative sector of the market currently holding its largest position ever, he does not think the market will necessarily drop lower in the near-term. "Funds typically will roll their positions over a few times before reversing. They are in it not for the quick move," he reasoned.

Similarly, the Pegasus Econometric Group of New York points to the market's inability to rally in the face of the declining storage surplus as a function of the already high level of speculative long positions. The group expects to see one more bearish storage report this Wednesday when the American Gas Association releases its weekly report. Last year's 100 Bcf figure will likely dwarf this year's refill, which Pegasus predicts will fall in the 50-70 Bcf area.

Pegasus pegs support at $2.205. Resistance still stands at prior highs of $2.405, the group said.

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