In a somewhat stunning show of bullishness, natural gas futuresprobed higher yesterday as funds and locals followed the lead ofcommercial buying throughout the last hour of trading. On its firstday in the limelight, the new prompt month, October, received thelargest boost of any contract at Nymex, leaping 15.8 cents higherto close at $4.801. In doing so, it set a new all-time high dailysettlement for a prompt contract.
As is usually the case on Wednesday, much attention was centeredon the weekly release of fresh storage data. This week, however,traders were especially interested on the report to see what, ifany, impact the shut-in of capacity heading west on El PasoPipeline would have on storage injections. That question wasanswered to a degree when the American Gas Association’s reportshowed that the 5 Bcf withdrawal in the West Consuming Region wasmore than offset by 12 Bcf injected in the Producing Region. Addanother 45 Bcf in refills from the East Consuming Region, whichcontinues to experience an extremely mild summer, bringing the netinjection last week to 52 Bcf.
Because the injection fell within the range of most preliminaryexpectations in the 40-60 Bcf range, it was deemed neutral by mosttraders surveyed by NGI Wednesday. Only one trader said they hadseen an estimate outside of the 40-60 Bcf range. “Our internal[storage] guy was looking for a 62 Bcf but he has been about 10 Bcfon the high side lately,” he said. But while the injection figurefell within the range of estimates, it fell conspicuously short ofboth last year’s 69 Bcf build and the five-year average injectionof 72 Bcf.
For Sandy Trot, a local trader, the breakpoint was 55 Bcf and hewas committed to buying “if we saw anything less.” As it turns out,he was not alone, as buying was also seen from commercial andnon-commercial traders. “We saw good buying from Enron, and fundsand locals were quick to join in,” he said. “The $4.685 level waskey. Once we moved above it, you had to be a buyer.” For Trot, therationale to buy October futures through the $4.685 level yesterdaywas based upon his experience with the way prompt months havebehaved in the past. “More than 80% of the time when the contractcan trade above its daily high from the day before it became promptmonth, it moves at least a dime higher,” he said.
Looking ahead, he believes that the market is destined for$5.00, probably sooner rather than later. “As long as we stay above$4.74, this thing will make a run at $5.00 and beyond,” he said.
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