The dam supporting natural gas futures prices finally burstThursday. After successfully fighting back numerous attempts tofall below major support at $2.11 the last several weeks, the JuneNymex contract succumbed to major selling by funds yesterday, andsettled the day down 10.2 cents to $2.067. Volume was extremelyheavy, with an estimated 93,072 contracts changing hands.

According to an industry analyst, the selloff was “no doubt”prompted by the latest AGA storage report, which added 30 Bcf tothe surplus to last year. “June is just a week-and-a-half away, sowe are getting a better and better idea of what demand will be likein June. Sure, temperatures can still be much above expectations,but we are heading into summer with a significant amount more gasthat we did last year. So even major deviations away fromexpectations may not be enough to raise prices significantly,” hesaid.

Maybe not, but perhaps increased temperatures will help preventfutures prices from falling much further. Because there is still achance for a high demand summer, a broker feels it’s still way tooearly for bullish traders to throw in the towel. “It [the Junecontract] hasn’t fallen off the cliff yet, but its definitelyrolling down the hill. There’s bound to be a bit of congestion inthis area because historically this is a place where price fallstend to die. Remember what happened last summer, when pricescouldn’t fall below $2.00. Plus, funds are probably short now, sothat could lead to some short covering in the near future,” hesaid.

June now has major chart support at $2.05, which is the previouslong term reaction low the contract posted on January 12. Shouldthe contract dip below this price, look for follow through supportat $2.00 and $1.97, a technician advised.

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