With traders eyeing the continued deterioration of the natural gas technical and fundamental environment, May futures on Friday plumbed new lows for the move, further exposing the possibility of a breach of the $3 price level. The prompt-month contract ended Friday’s regular session at $3.297, down 11.2 cents from Thursday’s finish and a whopping 43.2 cents lower than the previous week’s close.

After winding lower for much of the regular session, May futures recorded a low of $3.275 just after 2 p.m. EDT. In after-hours Globex electronic trading, the contract sunk even lower. So much for the common belief among traders that the $3.400 to $3.500 level would offer substantial support.

“A lot of people were expecting the $3.500 price to be a lot tougher to crack, but the market is not seeing anything out there that could spark bullish behavior, much less a decline in bearish behavior,” said a Washington, DC-based broker. “Baker Hughes reported Friday that 18 more rigs quit searching for natural gas in the United States last week. So now the count is 742 active rigs, but supply isn’t seeing the impact yet, so the event is being ignored for now by traders” (see related story).

The broker said he disagrees with a Barclays Capital analyst report released during the week that downplayed the idea that the U.S. market is going to be flooded by foreign liquefied natural gas (LNG) this summer (see Daily GPI, April 23). “They claim the Asian markets have seen an increase in demand and that Europe might choose to keep their LNG at home because they are worried of what [Russian Prime Minister Vladimir] Putin might do going into the winter,” the broker said. “I think the Barclays piece reads more like a contrarian report, where the guy just wants to get his name in the paper. I think the foreign gas is on the way.”

Looking at overall market factors, the broker said nothing much has changed. “We are in the shoulder season, so no one is demanding gas for heating or cooling and we still have an economy going nowhere fast. The bulls don’t have anything to get traction off of. Even the little rallies that do arise don’t last. They make the move, but are at lower levels than they began just a few days later. Our natural gas marketers have already done their buying. They might not have bought at the low, but they did their business, logged their discount and are now done. We could get new clients that haven’t already bought, but other than that, our folks are done. Without that source of buying coming in, we could see prices with a two in front of them pretty soon.”

May futures’ 12.3-cent drop Thursday to $3.409 following a slightly negative inventory report was all the grist technical analysts needed to call for further price weakness. Not even a bear market correction is in the cards, one says. “After a few weeks of a pathetic attempt at a bear market correction, the downtrend has resumed,” Walter Zimmerman of United Energy said Thursday afternoon. According to Zimmerman’s calculations at that time, nearly another 20 cents to the downside was possible in the short term. “Our near-term target is still the $3.215 level from the $4.880 high. Below that our next candidate for support is the downtrend channel support line. That line cuts at $3.025 [April 24] and at $2.930 by [May 1].”

Tom Saal and Ed Kennedy of Hencorp Becstone Futures in Miami see a buying opportunity. “End-users, you don’t get this chance often. Lock in prices for as far out as you can, for at least 20% of your forward burn,” they said in a note to clients.

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