After a negative opening and a quick check lower, natural gasfutures battled back Tuesday, as traders gleaned support fromstrength in nearby physical market prices and technical buying inout months. But despite yesterday’s positive price direction, theNovember contract never fully recovered from early its earlysluggishness and finished off 0.5 cents at $3.011. Meanwhile,December and January contracts closed up 2.6 cents and 2.1 cents at$3.148 and $3.158 respectively.

For Ed Kennedy of Miami-based Pioneer Futures there were twosub-plots that made up the natural gas story yesterday. The firstone was that of convergence, with October cash prices, Novemberfutures and 8,500 call options all clustered at the $3.00 mark. Thesecond, and undoubtedly more important story was the reemergence offund buying Tuesday. Hedge funds have been adding to their lengthas evidenced by the latest Commitments of Traders report, he said.”What we saw today were speculative funds buying into December andJanuary.”

What does that mean for the November expiry this afternoon?”Very little,” maintains Kennedy. “The ultimate fate of Novemberwill be decided by who is willing to make or take delivery[Wednesday]. Last week I was looking for a final settlement in thelow $2.90s. Now, with October cash prices holding up so well, theupper $2.90s to low $3.00s looks more realistic,” he offered.

Looking ahead, Thompson Global markets expects this afternoon’sstorage report will feature a 25-35 Bcf net injection versus 36 Bcfa year ago.

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