Nymex front months continued to lose strength yesterday withNovember opening sharply lower and slipping downhill fast duringlight morning trading. There was significant selling early asNovember dropped into the low $2.70s before 11 a.m. then choppedsideways the rest of the day, before ending at $2.744, less than 2cents off its daily low of $2.725 and down 8 cents for the day.

“It’s getting close” to the precipice, warned Ira Hochman, atechnician with New York-based Trot Trading Corp. “The key is goingto be the $2.66 area. I think if we break through there we’relooking at [a sharp fall]. It did fill a gap though, the gap at$2.72 from the other day. But right now technically it doesn’t lookvery good. You’ve got to respect that $2.66 double bottom there[set Sept. 21 and 22].

“You really do have to be technically short here. It doesn’tlook very strong,” he added. “It has to get back above $2.80 andclose above $2.90 to get this thing going again. Right now it lookspretty weak. It’s no fun trading this when it goes down.”

Without some significant heating load or another tropical stormto turn the cash market around, the sharp declines in spot pricesshould continue to put downward pressure on futures. Temperaturesin the major markets are expected to hover slightly below normalinto the weekend, and the storm activity in several sections of theGulf of Mexico shows no signs of producing a hurricane at thispoint, according to the National Weather Service.

The depressed market also continues to dwell on the recentabove-average storage injections and declining storage deficitcompared to last year. Over the past three weeks injections haveaveraged 79 Bcf/week compared to the five-year average of 69Bcf/week for that period. At 2,825 Bcf, total working gas levelscurrently sit 104 Bcf above the five-year average despite beingslightly lower than last year at this time, according to data fromthe American Gas Association. There likely will be five or possiblysix more weeks of injections, giving the industry plenty of time toreach the average full level of 2.93 Tcf.

The Pegasus Natural Gas report noted that with storage so closeto last year’s unusually high levels, “prices should head towardthe $1.972 level where last year’s edition of the November contractwent off the board. We’re willing to concede that expectations fora more normal winter and high crude oil prices may keep the marketat a premium to that level, but the recent dollar advantage wasdefinitely too rich.”

Hochman said if November opens lower today and is able to dippast $2.66, it could quickly take out $2.60 and reach $2.51 beforestarting back up. “I have to be honest with you,” he said, “I’m notgoing to be buying them that’s for sure. As much as I want to,there’s nothing telling me to buy it.”

©Copyright 1999 Intelligence Press Inc. All rights reserved. Thepreceding news report may not be republished or redistributed, inwhole or in part, in any form, without prior written consent ofIntelligence Press, Inc.