Long liquidation, that began with local selling Wednesdayafternoon, continued yesterday at the New York Mercantile Exchangeas traders sided with bearish supply figures and ignored bullishdemand predictions. The August contract tumbled 8.5 cents to $2.309and September matched that by dropping 8.6 cents to finish at$2.333.

Although it began early Wednesday afternoon, the real price routdid 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,” aGulf Coast marketer said. But the AGA gave them exactly what theyneeded when it said that industry injected 91 Bcf into storage lastweek. “That gave sellers the green light,” he continued.

Storage levels now stand at 2,033 Bcf compared to 2011 Bcf atthis time last year. But Ronald Barone of PaineWebber does notexpect storage will be able to keep up the pace. “We reiterate thatgiven declining deliverability, we do not foresee a material buildin the year-over-year storage surplus, he wrote in Natural GasInsight dated July 1.

However, a large storage refill was not the only bearish factorin the market yesterday. By gapping lower on the open Thursday, themarket completed what is commonly referred to as an island reversalpattern, a chart watcher said. An island reversal pattern is achart formation marked by either a gap higher followed by a gaplower or a gap lower followed by a gap higher. In either case themarket trades for a few days between the gaps, effectively formingan “island.” In this scenario the island represents a top, whichpoints to the possibility of further losses ahead.

©Copyright 1999 Intelligence Press Inc. All rights reserved. Thepreceding news report may not be republished or redistributed, inwhole or in part, in any form, without prior written consent ofIntelligence Press, Inc.