Picking up right where the September contract left off, October natural gas futures on Tuesday made another run at the psychological $5 mark. While it was rebuffed on this day, some market participants said it now appears that the sub-$5 door might be open.

October futures dropped 16 cents Tuesday to settle at $5.074. The contract bounced off of the $5.03 low on the day, which coincidentally was also the low the September contract notched before it expired on Friday.

“I think everybody is bracing for the move under $5,” said a Washington, DC-based broker. “We are going into the shoulder season now, and there is not much really there. I just think that the market is breathing a sigh of relief. Crude moving down as much as it has been has helped the [natural gas] bears as well, and we will see how this thing reacts when it taps $5, which I think is in the cards.”

The broker noted that if futures were able to break below $5, she believes that there might be some work beneath that level. “If you go off an old perpetual chart, your back looking at the $4.50s…without a lot of difficulty,” she said. “The other thing is with the huge discount, front-to-winters, they’ve got to come down too, because anyone who can store, will, because you can hedge against it.”

The broker noted that fundamentals still exist to the point that the market will be talking $4-6 prices this winter, but it is not like the old days, where the market bounced within the $1.75-3.00 range. “This summer’s fundamentals were definitely more bearish,” she added. “You really didn’t have the hot summer.”

As for Hurricane Frances’ impact on the natural gas complex, the broker said the storm is “not in the market,” meaning that traders are largely believing the reports that Frances isn’t headed towards production in the Gulf of Mexico.

On the Frances watch as of 5 p.m. (AST), the National Hurricane Center said the storm is travelling west at 17 mph approximately 140 miles north of San Juan, Puerto Rico. Wind speed was clocked at 140 mph.

The NHC said a gradual turn to the west-northwest was expected overnight Tuesday with a gradual decrease in forward speed. On this track, the core of the hurricane is expected to be passing near or over the Turks and Caicos Islands and the southeastern Bahamas during the next 24 hours.

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