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$2.70 September Futures? Not So Fast

$2.70 September Futures? Not So Fast

Following aggressive buying and double-digit increases achieved in Wednesday's Access trading session, the futures market cooled off yesterday as physical traders eschewed the opportunity to be long gas at the $2.70 level for the month of August. Once the market was unable to get past the $2.72 high from Access sellers came out of the woodwork and demoted the September contract to $2.569, down 3.7 cent for the session.

"This rally is a shark that must keep swimming or it will die," said Tim Evans of New York-based Thompson Global Markets. "The ride back down can be every bit as strong as the rally." On the downside, Evans thinks a break of recent lows in the $2.53-56 range is necessary to fully disturb the market's bullish sentiment. However, sellers might need some help pushing prices lower. That could come as soon as this afternoon when the Commodity Futures Trading Commission (CFTC) releases a fresh breakdown of the burgeoning open interest in the bi-weekly Commitments of Traders report. A Houston risk manager looks for a whopper of a report and expects that it will show that non-commercial traders, which are largely comprised of speculative fund groups, have accumulated more long positions than ever. The current all-time high was notched on June 15, 1999 when non-commercials were net long more than 51,000 in open interest. And if they are once again long by that amount, they will be looking to get out in a hurry, he reasons. "They have built positions between $2.30-65, which means that they are probably long from a weighed average of around $2.46-50. That will likely be their bail-out point. $2.50 will provide some psychological support but if price move below there it will be like a hot knife through butter," he said.

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