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December Tumbles to Expiry; January Outlook Poor
Fueled by a late sell-off, natural gas futures continued lowerlast Wednesday and put the finishing touches on a December futurescontract which slipped a whopping $1.06 or one-third of its valuesince becoming the spot contract a month ago. With no fresh news todigest, the market defaulted to the same old negative price outlookformed around above-normal temperatures and plentiful gas supplies.After hitting a black hole of buying below $2.21 shortly after noonWednesday, the December contract free-fell 6.9-cents to expire at$2.12 in abbreviated pre-holiday trading.
Expiration-day pyrotechnics, was one source’s description of theup-then-down price movement that made up Wednesday’s price action.”There was a strong push above $2.22 early by locals trying toinduce a $2.26 bid that could have led to further gains,” he said.But the bulls proved unsuccessful and in the absence of theirbuying, the sellers were free to push the market lower in the lasthour of trading.
With the price trend firmly set following a month full oftechnical disappointments, Ira Hochman of Trot Trading Corp.remains doubtful bulls can regroup. “2.50 was a big level [last]week. When December could not get past resistance above $2.50 thesellers had an easy time pushing prices lower.” Looking towardJanuary’s debut as the spot month today, Hochman recognizes supportat $2.20 and $2.10 ahead of $1.99, which is the last low before themarket began its ascent to the autumn highs. A quick look back atlast year’s post-Thanksgiving Monday madness shows those levels arecertainly possible. Following a disappointing settlement for theDecember 1998 contract, the January 1999 contract promptly took a25-cent nosedive on Monday, Nov. 30, 1998 to move below $2.00 andset a new life of contract low.
However, if the market is going to move lower, traders willfirst need to get past the latest storage data released Wednesdayafternoon. According to the American Gas Association, 20 Bcf waswithdrawn from underground storage facilities for the week endingNov. 19. Not only did the 20 Bcf draw exceed market expectationscentered on plus 5 to minus 5 Bcf net change, but it also surpassedlast year’s 13 Bcf withdrawal. With Wednesday’s report, storage nowstands at 2,996 Bcf, 73 Bcf less than year ago levels.
And although the rate at which storage supplies are depleted isa concern to market watchers, it undoubtedly takes a back seat tothe weather. Many areas of the country are forecast to seeabove-normal temperatures through the long holiday weekend, and theoutlook for the beginning of December is even warmer. In a revisedsix- to 10-day forecast released Wednesday afternoon, the NationalWeather Service said above-normal temperatures will prevail overmuch of the center of the country from Idaho across to the OhioRiver Valley and from the Great Lakes down to include East Texas.Normal temperatures will be found in parts of the PacificNorthwest, Northern California, the Southwest, and the Northeast.The only state expected to experience below-normal temperatures isMaine, the NWS said.
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