After dropping 13 cents Monday morning to carve out its lowest point in nearly three months, the natural gas futures market stabilized and chopped sideways to higher in the trading session as buyers stepped in at what they view as bargain price levels. Though it was initially hit hardest by the selling, the June contract also received the biggest buying boost as traders lifted it off its $6.405 low. The prompt month closed at $6.446, down 9 cents for the session.

“The first hour of trading is dominated by locals either probing lower for [commercial] buyers or higher for commercial sellers,” noted Tom Saal of Commercial Brokerage Corp. “Obviously, they found some pretty good buying down there today,” the Miami-based broker said.

Looking ahead, Saal believes Monday’s 4-cent rebound may be a sign of things to come. “The market’s inability to continue in the direction of its initial range suggests momentum is waning and that the market may be fairly priced. This is called a non-trend day in Market Profile and it can be a sign the market is in the process of a trend change.”

One piece of information that helps Saal in his call for a reversal is the growing net-short position held by the non-commercial segment of the market. According to the latest Commitments of Traders report issued Friday by the Commodity Futures Trading Commission, these hedge fund and speculative accounts grew their net short holding by nearly 6,000 positions to 24,927 as of May 10. It is these shorts that will quickly turn to motivated buyers if they sense the tide is turning, Saal assessed.

Background noise to Monday’s trading was the National Oceanic and Atmospheric Administration’s announcement that the Atlantic can expect yet another above-normal hurricane season. NOAA’s forecast for an active hurricane season, June 1 through Nov. 30, follows on the heels of last year’s destructive and historic hurricane season. Ivan, which was the worst for the oil and gas industry in the last 50 years, barreled down the eastern border of the Central Gulf of Mexico on Sept. 15, 2004, destroying seven platforms and causing significant damage to 24 other platforms. Seventeen underwater pipelines with diameters greater than 10 inches were damaged (see related story this issue).

However, the bullishness of that prediction seems to be offset — at least for the time being — by near term weather forecasts suggesting a continued lack of demand for both heating and cooling this week. According to AccuWeather, a storm system moving rain off the East Coast will be followed by a second storm currently over Quebec, which will combine with high pressure over the Heartland to usher cooler air into the Northeast. A few showers are expected to linger over parts of New England; otherwise, the East Coast is in store for an enjoyable spate of weather with some sunshine and afternoon temperatures in the 50s and 60s with a few 70s in the Mid-Atlantic states.

©Copyright 2005Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.