Technicals, Fundamentals Point to Post-Holiday Fireworks
Natural gas futures continued lower in an abbreviated
pre-holiday trading session Friday, adding to losses achieved
Wednesday and Thursday and stifling the hopes of bulls who were
looking for short-covering buying into the long weekend. The August
contract finished down 2.2 cents on the day at $2.287, 13.3 cents
less than Wednesday's high price. Estimated volume was an extremely
With little to comment about in Friday's session, traders turned
their attention to this week's price outlook. Most feel weather
will be the largest single determinant of the market's price
direction in July. If temperatures continue tracking above normal,
prices will stay up, but a return to normal or below normal
readings could sink the market, sources agreed. Near triple-digit
heat predicted in parts of the country over the holiday weekend
forced many utility buyers into the cash market Friday. As a
result, cash prices slipped very little from Bidweek levels.
But relief is on the way, says Brad Nesiba of Omaha-based
Strategic Weather Services. While admitting that the holiday
weekend and the beginning of this week will be a scorcher for much
of the country, he looks for temperatures, at least in the eastern
half of the nation, to start to moderate Wednesday and Thursday.
"Depending on how the [low pressure] trough sets up, we could see
below-normal temperatures from the Northeast into the Great Lakes
and Midwest by this week. The West, however, will stay hot," Nesiba
said. Looking further into the crystal ball at the medium range
11-15 day forecast, he predicts more of the same with high
precipitation in the Southeast expected to hold temperatures there
in check. "Texas will continue to be spilt. "Western Texas will
stay warm while eastern sections will be more mild," he concluded.
But don't sell the farm just yet, countered a Gulf Coast trader
who is weary of markets coming off long holiday weekends. "The
market will need to sort through a number of pieces of information
Tuesday morning. Many traders will have experienced hot weather
over the weekend and that could lend some psychological support to
prices. One the other hand, the forecasts will show moderating
temperatures into [this] weekend." On balance, he remains bearish
in the short term and looks for prices to continue into the teens.
"Nuclear utilization is at a five-year high at 91.4% and there are
more units coming back up [this past] weekend. If we get moderating
temperatures as predicted, there will be a lot of excess gas on the
market," he reasoned.
One fresh piece of information traders will have to digest
Tuesday morning is the bi-weekly Commitments of Traders report
released Friday afternoon by the Commodity Futures Trading
Commission. Released after the close of the abbreviated Friday
trading session, the CFTC reported non-commercial traders were
still net-long over 40,000 in open interest. That figure is down
from the 51,000 level of two weeks ago, but up from 34,000 last
week. Does that mean the speculators are ready to liquidate their
positions? Not necessarily, says a Houston risk manager.
"Neutralizing their positions, maybe. They rolled out of July into
August since the last report and it's not an exact science. In the
process, they got a little less long. Now they have the choice of
rebuilding or continuing to sell off," he said
Technically speaking, Tim Evans of New York-based Thompson
Global Markets believes the market is in a pivotal spot. A move
back through $2.35-36 would earn the August contract another try at
resistance at $2.42, while support at $2.25-265 stands to limit
further declines, he said.
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