Fresh from a gargantuan six-day, 72-cent price retreat, thenatural gas futures market regained its composure Friday, asscale-down buyers took advantage of lower prices, and new shortscovered positions into the holiday weekend. The October contractclosed up 9 cents at $2.561 in an abbreviated pre-holiday session.

A Dallas-based trader was not surprised by Friday’s rebound andbelieves that the market may have been led lower under the falsepretense that there are excess supplies out there. “Faced with$3.00 prices, many utilities choose to hold off on both baseloadand swing prices in the hopes that prices would come down. Thatmade it seem like there was a ton of gas out there. [This] weekwhen they are forced back into the market and the industrial demandramps up, we will get a better sense for what the Septemberaftermarket holds,” she reasoned.

However not everyone shares her somewhat optimistic priceoutlook. “The melt down continues,” observed Susannah Hardesty ofIndiana-based Energy Research & Trading. Hardesty, who has beenpredicting a price retreat of this magnitude for several weeks,expects the market to continue lower to the second summer low nolater than September 10. However, she warns that her forecast isproblematic because September 10 is also the historical peak ofhurricane season. But barring the formation of new storms, Hardestyexpects prices to carve out a bottom between $2.30 and $2.10 thisweek.

According to the National Weather Service there was no threat oftropical storm formation through Saturday. But don’t underestimatethe surprise factor that will occur if we arrive in the officeTuesday morning to the news of another tropical system, a Chicagomarketer warned. “That is why we got a bounce [Friday]; nobodywants to be short over a long weekend.

Looking ahead to this week, Hardesty believes that the marketwill receive another dose of bearish news this Wednesday with therelease of fresh American Gas Association storage data. She looksfor an injection in the 70-90 Bcf range, which if realized would atleast double last year’s 35 Bcf tally. “Supply shortages andpotential deliverability problems disappear from conversation whenthe roller coaster is heading down,” she continued.

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