With little fresh fundamental news of its own, the natural gas futures market was a slave to the whims of other markets’ traders Friday. After dropping lower at the opening bell in sympathy with 30-cent losses in the cash market, natural gas futures regrouped and trended higher during the open-outcry session, as buyers fed off the strength in the nearby crude oil pit.

The June contract closed at $6.122, down 0.9 cents for the session, but nearly a dime above its early session low. At 54,108, estimated volume was proof of the lackluster trading session.

Thursday’s 18-cent drop in June futures, coupled with the reduced demand associated with the weekend, put cash market prices on a slippery downward slope Friday morning. After peaking at $6.28 and averaging $6.24 Thursday, Henry Hub cash prices averaged $5.95 for weekend delivery, a drop of 29 cents. The June futures market took its early price clue from the weaker physical market, gapping 8 cents lower with its $6.04 opening print.

However, the market found no equilibrium at that level and short-covering was quick to boost prices back up to near unchanged on the day. Crude oil futures were also cited as a supportive factor. June crude finished at $29.14, up 40 cents for the session and within striking distance of recent highs of $29.48.

Looking ahead, the natural gas market is caught in something of a pickle. At just 900 Bcf, storage is only about 28% full and more than 800 Bcf less than year ago levels. That fact, coupled with the excess demand expected this summer for electric generation and the purported supply decline has many industry observers concerned that there will simply not be enough gas come December. Secretary of Energy Spencer Abraham took an unusual step Friday in calling for a special June meeting of his advisory oil and gas group, the National Petroleum Council (NPC), to focus on natural gas storage and the “looming challenges” facing the United States (see related story this issue).

And while most would agree this market has potential to climb higher this summer and especially this winter, there was an audible growl from the short- to medium-range bear traders Friday. “[Thursday’s] price action confirms the rally phase is complete,” wrote technician Craig Coberly of GSC Energy in Atlanta in a note to customers. “The short-term and possibly intermediate term, price trend has turned down,” he said, calling for lower prices for two weeks or possibly more.

Using Elliot Wave analysis, Coberly continues by outlining three possible cases. The least bearish of which would be a decline no lower than the $5.75 level, and the most bearish case being a “unrelenting multi-week decline” that will deliver prices below the April 3 low of $4.92. The middle, or “moderately bearish case” is for prices to partially correct the April 29 to May 14 rally, which would lead prices down as low as the $5.65 level, Coberly said.

Using retracement levels based on the mathematical sequence devised in the 13th century by Leonardo Fibonacci, Tim Evans of IFR Pegasus in New York also eyes the $5.64-65 level. Specifically, he calculates that a 61.8% retracement of the April 29 to May 14 move would give the market a layer of support at $5.64. Lower still, he sees buying in conjunction with the $5.46 low from May 7 or the gradual channel support at $5.32.

©Copyright 2003 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.