All but eclipsed by yet another day of wild swings on Wall Street, energy futures still were able to make a splash on Friday as crude futures pushed below $80/bbl for the first time in exactly one year and natural gas futures continued to nip at their 13-month low. November crude ended up closing $8.89 lower at $77.70/bbl while November natural gas finished at $6.535, down 29 cents on the day and 82.3 cents lower than the previous week’s finish.

With the Dow Jones Industrial Average venturing below 8,000 on two separate occasions before rebounding and locking in a loss of 128 points and a close at 8,451 points, the U.S. and global economic uncertainty continued to bleed over into commodities, where liquidation to free up cash continued to be the order of the day. Continuing the trend of strange coincidences after the Dow on Thursday dropped to a five-year low on the exact one-year anniversary of its all-time high, November crude futures on Friday dropped below $80/bbl for the first time since the exact same day of 2007 (Oct. 10).

“What we are seeing in all markets is a global margin call, where everyone is looking for cash. Besides the Japanese yen, the U.S. dollar and a few other things that were in the green [gains] on Friday, everything else on my screen was red [losses] most of the day,” said a Washington, DC-based broker. “If you open a stock account and buy $10,000 worth of stock with $5,000 — which you are allowed to do on margin — and then values went down, you would get a margin call. You could either send in cash, which the world does not have right now, or you can sell. The markets keep dropping, which continues to trigger new margin calls. We are seeing deleveraging all over the place.”

The broker said “herd mentality” is in full force in all markets. “Nobody is looking at any sort of fundamentals right now, so this is where technical analysis comes to the fore,” he said. “Technical analysis is based upon the idea that there is a herd mentality. Patterns repeat…and they repeat because when we are faced with uncertainty we ‘herd.’ I think that is a fair description of what is going on right now in equities and commodities. Focusing in on natural gas, $7 had been pretty good support all of the way back to November and December of 2007. I am willing to give 40 or 50 cents leeway, but if we break below the $6.500 area, the next real support does not come in until $5.500.”

Analysts say they are not left with much choice for price direction predictions after assessing the outlook for burdensome supplies and a weaker economy. At this early stage of the winter heating season trying to estimate natural gas consumption is a perilous undertaking at best. The weather forecasts of Joe Bastardi notwithstanding (see Daily GPI, Oct. 9), a conventional assumption of 2 Tcf seasonal demand coupled with what look to be ending stocks in the neighborhood of 3.4 Tcf suggest a plump 1.4 Tcf may be in hand at the end of the winter heating season.

It may be even greater. “Even the 2 Tcf consumption is in question considering the current supply and demand, and I am thinking that it has to be a little cooler than normal to reach 2 Tcf based on industrial demand and where the supply is,” said Kyle Cooper of IAF Advisors in Houston.

With credit concerns in play and the outlook for such economic sectors as steel, chemicals and glass manufacturers in question, industrial demand for natural gas may slide. “It doesn’t seem that the industrial sector of the economy is going to do all that well for the next few months. That and with consumers probably worried about prices, they may cut consumption of natural gas. There may even be a lower burn per degree day,” Cooper said.

Others don’t seem worried about burdensome supplies and potential low demand. Phil Flynn of Alaron said he “bought November natural gas at approximately $6.70, stop $6.40.”

©Copyright 2008Intelligence 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.