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Futures Mark a Lazy Summer Friday

Futures Mark a Lazy Summer Friday

Lacking strong leadership for the fourth day in a row the natural gas futures market continued to limp lazily sideways Friday. But unlike the modest gains that were posted Tuesday, Wednesday and Thursday, prices drifted lower to close out the week, possibly setting the market up for more losses today. The July contract finished 3.7-cents lower at $2.258.

After opening at $2.31 the market quickly bristled higher to etch a $2.315 high and in doing so was just a penny away from triggering options-related buying said a Gulf Coast risk manager. "The market failed to pin options at $2.30. Had the screen been able to print a $2.325 we would have seen a wave of buying pressure from sellers of all those $2.30 call options who would have been forced to cover by buying futures contracts," he said. However, the buying pressure dried up, allowing prices, as well as the heart rates of call option sellers, to go down.

"It wasn't for a lack of shaking, but very few nuts fell out of the future tree today," commented a Southeast trader in an attempt to explain the market's dearth of movement during the usually more spirited day before expiration. "Locals were notably absent from trading and that took the volatility right out of the market," he continued.

Looking ahead to expiration today, most sources polled by NGI believe prices will likely continue lower, barring a dramatically warmer weather forecast or emergence of a storm in the Gulf of Mexico or Caribbean Sea. "$2.20-21 is the next major level. If prices are able to pierce through that level of support, funds will likely say, "it's been fun; we're outta here," he concluded.

Susannah Hardesty of Indiana-based Energy Research and Trading looks for trading activity to remain quiet into expiration today. "As long as $2.35 holds as the high, wait to close out shorts until the final day of trading. Again, if there is to be a breakdown, it may not come until the final hour. In [seven] out of the [nine] prior years, July futures have declined into the final day of trading." In both cases when prices moved higher in the July expiration-1996 and 1998-the seasonal moving average system was in a buy signal, not a sell signal like this year," Hardesty advised.

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