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Storage Gives Bulls Much Needed Reprieve

Storage Gives Bulls Much Needed Reprieve

After a brief and uninspired upside push was thwarted, natural gas futures continued lower yesterday as follow-through selling took prices to their lowest level since April. No fresh news was seen influencing prices, and as a result bears remained solidly in control, traders said. The August contract finished down an even nickel at $2.141.

Many traders feel that the precipitous price slide has been a function of speculative fund groups liquidating large net-long positions. According to the latest Commitments of Traders data released last week by the Commodity Futures Trading Commission non-commercial accounts were net-long 40,152 as of June 29.

However, a Gulf Coast trader remains unconvinced the selling was dominated by the funds. "It would stand to reason that they were sellers, but open interest actually increased during Monday's session. That leads me to believe that it was fresh selling rather than long liquidation," he said. Where does that leave the market? In a quandary, he continued. "If funds are exiting positions then the market should head lower, but I am not convinced they have abandoned their positions quite yet."

While bulls may have lacked the impetus to take prices higher during the regular session Wednesday, they received a helpful boost when the American Gas Association (AGA) released its weekly storage data yesterday afternoon. According to the AGA, 69 Bcf was injected into underground storage facilities last week. Falling short in both comparisons with last year (74 Bcf), and expectations (80-90 Bcf), last week's refill figure was met with immediate buying when the market reopened yesterday evening for after-hours Access trading. As of 6 PM the August contract had recouped 3.9 cents to $2.18.

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