Earl Turns to the East as Futures Head South

The futures market followed-through on its usual hurricanescript Wednesday by reversing early week price spikes to plummetlower as Hurricane Earl plodded toward Florida and away from gulfcoast production. “Buy the rumor, then sell the fact,” is the adageoften bandied about when there is the potential for a hurricane todisturb supplies in the gulf and yesterday the phrase rang true asdismal fundamentals factors once again took center stage in themarket. That carried the October contract down 13.4 cents to settleat $1.652.

Now the question becomes whether futures will continue downward- following the long-term trend or if supply disruptions in theGulf will provide support for the market as traders scramble tomake up imbalances. A Mid-Atlantic marketer favored the formernoting that nothing positive could be gleaned from Wednesday’strading. “Not only did we gap lower at the open, but October wasable to post a new life-of-contract low at $1.63 today.”

However, a New York area analyst was quick to point to themarket events in August of 1995 as a possible script for Septemberof 1998. “The market similarities abound,” he quipped. He went onto explain that in August of 1995 prices were low and stocks of gasin storage were high. Then in the first week of August the gulf wasbesieged by Hurricane Erin. Production came off line for a few daysbut it was the rest of the month that was compelling-cash pricesfor the rest of August stayed strong, never dropping below indexlevels and futures followed their lead higher. The aforementionedanalyst feels this could be a plausible scenario for September 1998to follow, but warns this market had some “major league length”coming into the month of September.

In daily technicals, resistance now stands at top of the newlyformed chart gap at $1.73, with support at September’s spot low of$1.61

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