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
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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