With no sign of bullish fundamentals anywhere to be found, October natural gas futures pushed lower again Friday to close at $4.627, down 15.4 cents on the day and 35.5 cents lower for the week.

The week was dominated by speculation following reports that the Amaranth Advisors hedge fund lost in excess of $6 billion trading natural gas futures during the week ended Sept. 15. Industry insiders questioned whether the natural gas futures market had seen the full fallout yet. One source said he expects it will take another two weeks to see the full impact on the market (see related story).

Rafferty Technical Research’s Steve Blair said stout storage injections over the last few weeks combined with Amaranth fallout helped prompt month natural gas continue lower for the week. “I’m not surprised we came down another 15+ cents Friday following that 108 Bcf storage report last week that crushed the market. Then the whole Amaranth story crushed the rest of the market,” Blair said. “We then got a 93 Bcf injection into storage in this week’s report. While the number was mostly expected, it brings storage levels almost to that 3.2 Tcf full level. Storage is sitting at 3,084 Bcf and we still have a month and a half left in the traditional injection season, so no matter how you look at it, the fact remains we have an awful lot of gas in storage right now and there is good reason for the market to be down at these levels.”

Looking at support lines, Blair said the $4.50 to $4.60 support area from two years ago looms large. “If we get down there next week, it will be very interesting to see what the market does at that point,” he said. “However, I still see some more room to the downside. There is nothing to stop us from going lower, short of us walking in at some point and seeing a hurricane headed toward the Gulf of Mexico. Without that, there really is no reason for this market to do anything to the upside. The downward pressure remains firm.”

Top technicians are taking a wait-and-see attitude. “The last time natural gas fell this low it was a fantastic buying opportunity,” said Walter Zimmerman of United Energy. He noted that at that time, September 2004, the market gave a very bullish candlestick bottom on the daily and weekly chart. “There is so far no such reversal higher happening now.” He said bulls needed a weekly close near $4.930 just to eke out a candlestick bottom on the weekly chart.

Others are more bullish. “Don’t forget that the market is artificially down at these levels because of Amaranth and everything else. Once the buyers of the Amaranth portfolio are done liquidating the winter quarter of the price curve, or other parts they don’t like, that will be it for the decline in prices,” said a California risk manager.

He said a number of end user accounts were taking the current opportunity to lock in prices. “Once you get the first snitch of cold weather it’s ‘Oh my gosh, it’s winter,’ and prices are off to $7. I would say that $5 October and $6 November make sense, but the rest of the curve out six-to-eight months is a little low.”

The risk manager added that in the longer term, unless the market down the road becomes so oversupplied with natural gas in the form of imported gas or LNG, “call option premiums will always be greater than put premiums. I tried to do an equidistant fence in January at $7.90 and it was 17 cents premium to the call. I kept the put at $6.75 and had to move the call up to $9.40 and got it down to 3 cents bid at 6 cents,” he noted.

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