Futures: Buy the Rumor, Sell the Refill
After a lower open at the bell yesterday, the futures market
moved higher and easily recouped Tuesday's losses. The July
contract finished up 6.7 cents and in doing so registered an
outside up-day on the daily charts.
And while commercial and local traders were seen as buyers, Ed
Kennedy of Miami-based Pioneer Futures believes the entire energy
complex received an unexpected buying push from inflationary hedge
funds that have been conspicuously absent from the futures market
recently. "Fears about interest rates are resurfacing and that is
prompting these money managers to once again look to hedge away the
risk of inflation by buying the commodities that make up the CRB,"
he said. Natural gas was added to the basket of commodities tracked
by the Commodity Research Bureau (CRB) four years ago.
Inflationary concerns, however, were not the only bullish
factors yesterday. One Gulf Coast trader felt Wednesday's strength
was a bit of bullish optimism ahead of yesterday's storage report.
But when the storage figures were released last night by the
American Gas Association (AGA), "optimism" and "bullish" could no
longer be used in the same sentence. The AGA said that 91 Bcf was
injected for the week ending June 4. That represents the first time
since the beginning of April that the 1999 refill was greater than
the corresponding weekly build from 1998. Total estimated working
gas in storage is now 1,794, which is 41 Bcf more than at the same
time last year. The market was quick to digest the news in
yesterday's after-hours Access trading session where the July
contract tumbled 3 cents lower to $2.43 by 6:15 P.M.
Looking ahead, Kennedy looks for the bulls and the bears to draw
a line in the sand at $2.36. Above that level he sees limit-buy
orders that will likely prop up the market. However, a break below
$2.36 would trigger sell stops that "could propel the market and
additional 5 to 8 cents lower in a hurry.
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