Fundamentals Win One for the Bulls
After cascading nearly 15 cents lower Tuesday and Wednesday,
natural gas futures rebounded yesterday as traders ignored the
bearish technical picture and focused instead on constructive
fundamental factors. The August contract slipped at the close, but
was still able to post a 2.1-cent advance for the day to $2.162.
Traders were quick to point to the Wednesday afternoon release
of fresh storage data as a supportive feature in market dealings
yesterday. The American Gas Association said that 69 Bcf was
injected into storage last week and that figure fell short of
comparisons with last year (74 Bcf) and market expectations (80-85
Shortly after the storage report was released, the National
Weather Service put another potential arrow in bull traders' quiver
when it released its latest short-lead forecast. Above-normal
temperatures are predicted on both East and West Coasts. The center
of the country, however, is expected to experience below normal
temperatures, the NWS said. And while Tim Evans of New York-based
Thompson Global Markets likens the forecast to a very rare steak,
"cold in the middle and hot around the edges," he feels it might be
enough to support prices in the short term.
"Natural gas has a fairly clearly defined bearish technical
picture. What it doesn't have is a bearish fundamental picture to
sustain it." Where have we seen this before, Evans asks. "Crude oil
futures-after falling for most of the month of May without any
really truly bearish fundamentals-rebounded $2.50 off the lows. He
went on to explain that while most fund traders had plenty of
incentive to sell the market based on pure technical factors, there
are those of them that resisted the temptation because of the
bullish fundamental scenario.
It remains to be seen whether natural gas will receive the
buying support that crude oil did, and Evans admits it will face
some major hurdles along the way. The first one will come in the
$2.22-25 area, which corresponds with prior lows from June 21 and
28. If the market is able to move through that level, Tuesday's
high of $2.325 will be the next level of resistance, he said.
©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.