Following the ups and downs of the last few regular trading sessions, natural gas futures traders highlighted the uncertainty on direction in the market on Tuesday as the December contract traded in a nearly 20-cent range between $3.750 and $3.928 before closing at $3.870, up 3.8 cents from Monday's finish.
Tuesday's action was relatively muted compared to the combined 27.5-cent climb from Thursday and Friday and the 20.6-cent decline recorded on Monday. What is clear is that the bulls' hurdle to higher prices just got a little higher following MDA EarthSat Weather's 2010-2011 winter temperature update.
According to the Rockville, MD-based private forecaster, changes from the earlier forecast revealed a trend in the warmer direction, primarily over the Plains and the Midwest, for December-February (see related story).
Traders utilizing trend following techniques suggest that December futures have a long way to go to take them out of their bearish posture. "The December contract would have to rise to $5.10 to put my model in a neutral position, and another 20 to 30 cents to go positive," said an Oklahoma City-based trader.
In hindsight last week's gains would have been golden opportunities to sell, but if the market were to make any further advances, "I would be a seller on rallies," the trader said.
Other traders see an opportune time to sit on the sidelines. "This push and pull between bearish supply-side fundamentals and supportive seasonal/technical considerations will likely keep this market in a wide-swinging, choppy trading mode for a few more weeks until winter temperature patterns acquire more clarity," said Jim Ritterbusch of Ritterbusch and Associates.
Such a trading mode may suit other traders and "as a result, we are content in moving to the sidelines for a few days following [Monday's] early price advance that pushed above our suggested stop-loss point. We anticipate a rangebound trade between about the $3.66 and $4.18 price levels within a time frame of about two weeks, and we will suggest trading the market accordingly for short term-oriented participants."
Last week's stout 71 Bcf gas storage injection sent inventory levels within a whisker of last year's record injection season. The build brought inventories to 3,754 Bcf, just 1 Bcf less than the 2009 pace. If estimates of heating load by the National Weather Service (NWS) are correct, gas in storage may be poised to surpass the record level set in 2009 of 3,837 Bcf.
For the week ended Oct. 30, NWS predicts far below-normal accumulations of heating degree days (HDD). New England is expected to see 82 HDD, or 47 below normal, and New York, New Jersey and Pennsylvania are seen with 58 HDD, 57 less than the region's normal pace. The Midwest from Ohio to Wisconsin is predicted to experience 80 HDD, or 45 off its normal tally.
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