For the third session in a row Wednesday, natural gas futures were fast out of the chute as traders pressured the market to a higher opening trade. However, in contrast to Tuesday when prices held strong throughout the session, Wednesday was another down-day on the charts as non-commercial sellers re-entered the fray. The August contract finished at $2.841, down 2.2 cents on the day, and in the lower half of its 16.5-cent trading range.

Several traders polled by NGI Wednesday saw the higher open as an obvious opportunity to sell into the market. While some traders feel that the market could easily rebound to test resistance at $3.05, the consensus seems to be that any move into the $2.90s represents a good selling opportunity. Using Bollinger Bands and a 120 minute August chart as his guide, Tom Saal of Pioneer Futures in Miami, put out a sell recommendation as prices approached the $3.00 mark. “Buyers wait for a sell-off before buying,” he told his clients.

As it turned out, that was good advice because the August contract extended no further than $2.945 Wednesday. Once it was apparent that the market had reached its top for the session, sellers pushed prices downward in a hurry. By 12:15 p.m. EDT, the August contract had bottomed out at $2.78. After a paltry 70,000 contracts traded Monday, activity at the New York Mercantile Exchange has roared back to life Tuesday and Wednesday as volumes have exceeded 100,000 contracts in each session. One possible explanation for that activity level is trading by non-commercial “fund” traders who have recently reversed their net long position in favor of a net short holding.

According to the latest Commitments of Traders Report released Friday by the Commodity Futures Trading Commission, non-commercial accounts held a net short position of 20,443, and history has proved that they can extend that deficit further. In fact, as recently as January, non-commercial traders were more than 62,000 net-short. At the same time, prompt month prices dipped down to a low of $1.85.

And while fund traders could pressure prices below recent lows in the $2.76-78 area, their trading activity will take a back seat to commercial traders and marketers Thursday morning upon the release of fresh storage data. Expectations have been downgraded somewhat over the past 24 hours so that the range is now a 63 to 80 Bcf injection. Last week, the market received a report featuring a 67 Bcf build. During the same week last year, the market added 101 Bcf to underground storage facilities.

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