Storage, Technicals Usher Futures Lower
Long liquidation, that began with local selling Wednesday
afternoon, continued yesterday at the New York Mercantile Exchange
as traders sided with bearish supply figures and ignored bullish
demand predictions. The August contract tumbled 8.5 cents to $2.309
and September matched that by dropping 8.6 cents to finish at
Although it began early Wednesday afternoon, the real price rout
did not get underway until Wednesday's Access trading session.
"Longs were eager to liquidate. They just wanted to make sure the
[American Gas Association] didn't offer up a bullish surprise," a
Gulf Coast marketer said. But the AGA gave them exactly what they
needed when it said that industry injected 91 Bcf into storage last
week. "That gave sellers the green light," he continued.
Storage levels now stand at 2,033 Bcf compared to 2011 Bcf at
this time last year. But Ronald Barone of PaineWebber does not
expect storage will be able to keep up the pace. "We reiterate that
given declining deliverability, we do not foresee a material build
in the year-over-year storage surplus, he wrote in Natural Gas
Insight dated July 1.
However, a large storage refill was not the only bearish factor
in the market yesterday. By gapping lower on the open Thursday, the
market completed what is commonly referred to as an island reversal
pattern, a chart watcher said. An island reversal pattern is a
chart formation marked by either a gap higher followed by a gap
lower or a gap lower followed by a gap higher. In either case the
market trades for a few days between the gaps, effectively forming
an "island." In this scenario the island represents a top, which
points to the possibility of further losses ahead.
©Copyright 1999 Intelligence Press Inc. All rights reserved. The
preceding news report may not be republished or redistributed, in
whole or in part, in any form, without prior written consent of
Intelligence Press, Inc.