Lacking strong leadership for the fourth day in a row thenatural gas futures market continued to limp lazily sidewaysFriday. 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 Julycontract finished 3.7-cents lower at $2.258.

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

“It wasn’t for a lack of shaking, but very few nuts fell out ofthe future tree today,” commented a Southeast trader in an attemptto explain the market’s dearth of movement during the usually morespirited day before expiration. “Locals were notably absent fromtrading and that took the volatility right out of the market,” hecontinued.

Looking ahead to expiration today, most sources polled by NGIbelieve prices will likely continue lower, barring a dramaticallywarmer weather forecast or emergence of a storm in the Gulf ofMexico or Caribbean Sea. “$2.20-21 is the next major level. Ifprices are able to pierce through that level of support, funds willlikely say, “it’s been fun; we’re outta here,” he concluded.

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

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