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December Closes Nearly Unchanged Following Quiet Session
Following Tuesday’s drop of 15.3 cents in December natural gas futures and Thursday’s firmness despite a bearish 78 Bcf storage injection report, traders appeared content to finish the week on a quiet note. On Friday the front-month contract traded between a morning high of $3.847 and an afternoon low of $3.769 before calling the whole thing off and closing at $3.783, up five-tenths of a penny from Thursday’s regular session close. December’s close was 14 cents lower than the previous week’s finish.
“I think traders are a little shell-shocked after Thursday’s storage report, but really, I don’t see anything out there right now that could move this market either higher or lower in a meaningful way,” said Steve Blair, a broker with Rafferty Technical Research in New York. “There are very few things that can turn this market to the upside. Either we have a tremendous economic turnaround and industrial load picks up, or we get some unexpected cold winter weather that sticks around for awhile. The cold would have to be exceptionally frigid and stay for an extended period to make a dent because we have plenty of gas on hand.”
Blair said Thursday’s news of a 78 Bcf injection for the week ending Oct. 28 came as a bit of a surprise. “It was bizarre that the market worked higher following the news, especially because most industry estimates were for an injection of 9-10 Bcf less. Sure, there are those people who say the large build might have already been baked into the price, but that doesn’t explain prices climbing.”
In reading the tea leaves, Blair said that while the market is normally thinking about a seasonal rally during this time of year, he’s not buying it. “I don’t really see any fundamental reason for the market to go higher and broach the $4 price level. However, I also don’t see a reason for the market to track below $3.500 either.”
Some analysts hint that the bears’ arsenal may be running a little lean. “The fact that this market has been able to hold above last week’s lows in spite of continued relatively mild temperature forecasts and a larger-than-expected supply injection is sending off some bullish vibes,” said Jim Ritterbusch of Ritterbusch and Associates.
Weakness in oil markets, however, could resurrect the bearish case. “[P]rice gains have been modest, and we feel that [Thursday’s] counter-intuitive response to the data release could easily be offset by even a small downside nudge from the petroleum complex,” he said. “While the post-report price action would appear to suggest selling exhaustion, we feel that the funds still possess sufficient ammo to employ toward the short side of the market. In addition to a deeply discounted cash trade, we are viewing supply/usage balances as near-term bearish, at least until some evidence of cold temps begins to show up in the forecasts.”
Conditions in the economy got close scrutiny with the 8:30 a.m. EDT Friday employment report by the Labor Department for October. Economy bulls were hoping the positive momentum from Thursday’s favorable factory orders report might carry over into better-than-expected figures for gains in nonfarm payrolls, but it was not to be. The factory orders report came in at a 0.3% gain, well ahead of expectations of a 0.2% decline, but nonfarm payrolls increased by 80,000, short of expectations of a 90,000 job increase. The unemployment rate inched lower to 9.0% from 9.1% the month before.
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