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Friday's Action Vastly Over-Rated

Friday's Action Vastly Over-Rated

Thursday night's Access gains, and higher prices in both the over-the-counter and cash market set the stage for the May futures contract to blast off Friday. In fact, the buzz around the pit at Nymex early Friday centered on when, not if, the prompt month would fill in the chart gap up to $2.19. But despite all the hoopla and bullish sentiment, the May contract could manage only a half-penny gain from its $2.16 open, leaving the market to trend lower throughout the rest of the day. May finished 1.3 cents lower at $2.124.

A Houston marketer thinks a lot can be learned by looking at the price action over the last few days. "The funds have been the active ingredient in this market. On Wednesday, they were extremely short, forcing the market to $2.075 and [Friday] they were extremely long, leading the charge to $2.165. However, in both cases they received little or no help from either trade buying or selling and so they were unable to influence a move outside of the trading range." Having said that, he feels the market may have found fair value in the $2.10-14 level until it can latch onto something fundamental for direction.

Natural gas has endured three winters in a row of above normal temperatures, but Mother Nature may leave its mark on prices yet. The esteemed Colorado State hurricane forecaster William M. Gray predicts there will be 14 named storms during the Atlantic hurricane season, which is dramatically more than average of 9.3 (see full story that follows).

And although most would agree hurricane hype has yet to be imbedded into the futures market, one trader said he had seen its impact in the forward market. "There has been a real unwillingness on the part of sellers to offer term gas for the summer months because of how bad they were burned last August and September when gas was shut in. The only term deals out there are carrying a big premium and nobody is interested in paying up."

And in addition to the possibility of an active hurricane season, the market is starting to weigh the possibility of warmer than normal summer. By looking at sea surface temperatures in both the Pacific and the Atlantic Oceans, Fred Gesser of Omaha-based Strategic Weather Services expects the next three months to feature generally above-average temperatures in the Central U.S. and Plains. However, that will be countered by normal to below-normal temperatures in the Northeastern U.S., Gesser continued.

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