After roller-coastering within a 13-cent range for a majority of Monday’s regular session, October natural gas futures decided that the higher end was more to its liking, settling up 14.1 cents on the day at $5.249.

With production shut-in reports coming from Gulf producers as well as the Minerals Management Service (MMS) during the day (see related story), futures ping-ponged during the afternoon in search of direction. The prompt month traded mostly within the $5.125-5.25 range. However, despite the uncertainty, futures never attempted to break back below the all-important $5 support area.

The MMS reported that as of 11:30 a.m.(CT) Monday nearly 2.9 Bcf/d of production remained shut-in with 32 platforms still not operating. The total was down from the 6.5 Bcf/d shut in and 545 unmanned platforms at the height of the storm last week. The cumulative gas production loss in the Gulf of Mexico from Ivan was pegged at about 33 Bcf.

Craig Coberly of GSC Energy in Atlanta said he believes natural gas futures in the short term should be consolidating, or moving higher, followed by the intermediate term, where he believes the market will have bottomed and will move higher.

“Friday’s price action was strong evidence that the intermediate term trend has finally bottomed,” Coberly said. “As you know, I’ve reached this conclusion a couple of times before, only to have it invalidated by subsequent price action.

“Although I strongly doubt it, it could happen again. I’ve added confidence this time because of the very strong price reversal, the close above the resistance line [Friday] declining from the July 30 high and the bottom and crossover made by the weekly stochastic oscillator.” Coberly noted that natural gas would have to trade below $4.52 to invalidate this bullish premise. “Even then, the $4.52-4.50 price level should provide very strong support.”

Tim Evans of IFR Energy Services said he believes the current storage situation might be too healthy to foster prices moving higher.

“October natural gas set a minor, overnight low at $4.98 that may function as a pivot going forward, with a break knocking prices back toward the $4.72 low from Friday’s bar and then the $4.52 low from Thursday in turn,” he said. “As we’ve noted often in recent weeks, the $4.39-4.40 lows from September-October 2003 may be at risk given the 255 Bcf year-on-year surplus, and this could put psychological support at $4.00 or even the $3.74 spot low from November 2002 into the picture.”

He added that this downside risk is even greater for the deferred contracts, which will tend to “converge with the cash market,” with all else being equal. “On the upside, a push past $5.27 would extend Friday’s gains, but may leave the market vulnerable to reversal,” Evans said. “We see more selling in conjunction with failed support at $5.39-5.43, and congestion right through the $5.75 October highs from mid August. Short covering into next week’s contract expiration could hold the entire market firm, but we think it is only a matter of time before the lows are re-tested.”

©Copyright 2004 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.