Forget the old nine-to-five, all the action now takes placeafter hours. While that sounds like a seedy radio ad for a happyhour hot spot or club, it is also an apt description of the naturalgas futures market as of late. Wednesday was a perfect example ofthis as prices climbed higher overnight Tuesday and notched a newhigh at $8.80 on the opening of the regular trading sessionWednesday, only to tumble lower for much of the remaining regulartrading session. However, bulls were on the offensive again lastnight as they bid up prices in overnight Access trading once again.As of press time at 7:30 PM (ET), the January contract was at$9.07, 58.5 cents higher than Wednesday’s $8.485 settlement price.

While some traders are at a loss to explain this price action,George Leide of New York-based Energy Research and Trading pointsto the practice of liquidating positions before the close of theregular session by traders looking to reduce their exposure tomargin requirements. These traders then get right back in duringAccess trading, reinstating their positions. “It doesn’t explainall of this price action, but some,” he explained.

However, he may have a point. Since the announcement by Nymex onMonday that they were going to raise the margins on its Henry Hubnatural gas contract at the close of business Tuesday (to $13,500from $10,125 for its customers), the market has fallen lower at theclose of each of the last three trading sessions.

Looking ahead, Susannah Hardesty of Indiana-based EnergyResearch and Trading says there is no indication the high has beenreached. She believes that the high will come on a move up to$10.00 at most.

Leide, on the other hand is not willing to put a cap on thisprice move and believes that you have to respect the market’svolatility by trading smaller lots. “100 lot traders are now 10 ortwenty lot traders. Twenty lot traders are now trading five lots.You are asking for trouble by even questioning if the market hasmade a top.” Moreover, he believes a top will be in place when themarket gaps higher, blows off to new highs, closes near the bottomof the range, and then gaps lower on the next day’s open. “Thatwould be a classic island reversal pattern and it would cause me totake notice,” he said.

According to the American Gas Association, 73 Bcf was pulledfrom underground storage facilities last week, bringing levels downto 2,429 Bcf, or 74% full. Compared to the 70-100 Bcf range ofexpectations, the draw down was slightly on the bearish side.However, it outdistanced the 69 Bcf net takeaway seen last year atthis time causing the year-on-year deficit to surpass the 500 Bcfmark for the first time since February.

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