September natural gas futures fell quickly in what appeared to be aggressive technical selling Monday. The selling was nearly instantaneous and looked like it was triggered by a breach of last week's lows. At the close of the day September fell 10.0 cents to $4.228 and the October contract retreated 10.1 cents to $4.249. September crude oil fell 15 cents to $75.24/bbl.
"This market continues to struggle, and earlier in the day it broke last week's low and the market came off about 8 cents in a minute," said a New York floor trader. "It looked like there were stops [loss orders] on the screen, because it went quick. Once it got below $4.265 everything went."
The floor trader suggested that the market was "tapping the low end of the range. I think it may work another dime lower, but I think the market will bounce back over the next week and we'll see a little short-covering. I'm looking for a test of the $4.45 to $4.50 area with the market holding the $4.10 to $4.20 range over the next day or two and then we bounce back."
Monday's decline fits the trend of concerted selling by funds and managed accounts. For the five trading days ended Aug.10, directional traders made hefty sales of futures and options, according to the Commodity Futures Trading Commission Commitments of Traders Report. At IntercontinentalExchange long futures and options (2,500 MMBtu) rose by 3,102 to 238,595 and shorts increased 2,046 to 20,609. At the New York Mercantile Exchange long contacts (10,000 MMBtu) rose 960 to 146,372 and short futures and options added a whopping 36,351 to 215,961. After adjusting for contract, size long contracts at both exchanges rose 1,735 and shorts rose 36,862. For the five trading sessions ended Aug.10 September futures fell 34.2 cents to $4.297.
Traders continue to look for a market boost from weather and tropical developments. "This year has started as the hottest year ever, with the first seven months registering the warmest temperatures on record," noted Peter Beutel, president of Cameron Hanover, a Connecticut-based energy consulting firm. "Over the first seven months of 2010, temperatures [were] 58.1 degrees Fahrenheit from January through July. This substantially increases the odds of it turning out to be a very hot August and it further increases the odds that tropical storms and hurricanes will form over the warm waters of the tropical Atlantic Ocean."
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