Despite tumbling prices in the nearby cash market, natural gasfutures held their ground Tuesday as buyers were comforted byextremely oversold conditions and supportive intermediate-termtechnicals. After trading within a wide, 20-cent swath yesterday,the December contract finished at $4.49, a narrow 0.5-cent increasefor the session.

For the growing number of natural gas bears, yesterday’s priceaction was a case of trick and treat. While they were impressed byDecember’s ability to notch new two-and-a-half month lows, theywere disappointed by the late surge that enabled the prompt monthto close in the upper half of its daily trading range.

Similarly, bulls were ambivalent about the market followingTuesday’s trading. On the one hand, the market is oversold and thusprimed for a bounce. On the other hand, it was hard to make thecase to hold long positions ahead of this afternoon’s storagereport, they said.

As is usually the case early in the week, the market banter wascentered on expectations ahead of the Wednesday AGA report. Afterlooking at actual degree-day accumulations for last week, NewYork-based IFR Pegasus has ratcheted up its forecasts from a 50-60Bcf refill to an “even more bearish 60-70 Bcf net injection.”Comparatively, last year at this time the AGA announced a 4 Bcfbuild and the 5-year average is a 30 Bcf increase. The only bullishfactor for this market in the near term, the group adds, “seems tobe that it is sufficiently oversold to be due for technicalcorrection.”

Looking primarily at technicals, George Leide of New York-basedRafferty Energy Group is cautiously bullish in the intermediateterm. “The market’s ability to stay above support and closeunchanged is constructive… Enough to make me want to go homelong,” he said as open outcry session was coming to a closeyesterday afternoon. As it turns out, those words were propheticTuesday, because no sooner had the market reopened in Accesstrading then the prices were notably higher. By 5:30 PM (ET),December was 8 cents higher at $4.57.

Leide’s rationale for higher prices is driven by what he callsnice solid support in the $4.35-40 area. That area, he continued iscomprised of three prior lows on the December daily chart as wellas an uptrend formation drawn on the weekly chart. On the upside,he targets intermediate resistance at the top of the trading bandup at the $4.94-5.00 area.

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