As yet another storm in what is shaping up to be one of thesnowiest winters on record pummeled New England Friday, natural gasfutures spiraled higher only to reverse lower at mid-day as tradersstared ahead at bearish intermediate-term temperature and storageoutlooks. The May contract tumbled lower under the considerableselling pressure to close at $5.025, leaving the prompt month witha 24.9-cent loss to conclude the week. Considering the size of theprice move, volume was relatively weak as less than 60,000contracts changed hands.

More than a foot of snow was expected to fall over parts ofnorthern New England through midnight Friday, adding to snowfalltallies this winter approaching 200 inches at some locations,according to the National Weather Service (NWS). As a result, cashprices were fast out of the chute Friday with Transco Station 65deliveries topping the $5.50 level. The futures market followed thelead of cash prices and that enabled the May contract to testThursday’s high at $5.42. But no sooner had the bulls begun to reartheir horns than new, and decidedly bearish, weather forecasts werereleased.

According to the latest six- to 10-day forecast released Fridayby the NWS, above-normal temperatures are expected over the easternhalf of the country later this week. Meanwhile, the West Coast willsee below normal readings, effectively reducing theair-conditioning load for that area of the country.

After watching prices tumble nearly 25 cents in just 15 minutes,several traders said long liquidation by fund traders was at theroot of the price slide. “Commercials, who are naturally longphysical supplies, tend to be better able to stomach a move like wesaw today. This was funds heading for the exits pure and simple,” aHouston-based futures trader said. Specifically, he felt themarket’s inability to hold above the $5.25 area was key. “That was[Thursday’s] low and the low for Access trading [Friday] morning.When the market moved back beneath $5.25, you had to be a seller,”he reasoned.

Looking further out on the price horizon, the bulls really havetheir work cut out for them, he continued. “Fundamentally, thismarket has lost demand through a combination of a slowing economyand the high absolute level of prices. There has been a lot saidabout our ability to get through this summer with enough supply,but now some of those fears are beginning to wane….. The realevidence will come each Wednesday. If we start to see some healthy[storage] injections early on, this market could be in for acontinuation lower,” he reasoned.

However, last week was relatively cold and accordingly theAmerican Gas Association will probably show another net withdrawalthis Wednesday when fresh storage figures are released. For TimEvans of New York-based IFR Pegasus, the storage withdrawal couldbe in the 15-25 Bcf range, which would outpace both last week’s 12Bcf draw and last year’s 5 Bcf comparison.

©Copyright 2001 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.