June natural gas futures gained ground Friday as traders cited a lack of sellers, a positive employment report and a market divorced from the shell-shocked petroleum and equities markets.
June added 8.6 cents to $4.015 and July added 8.2 cents to $4.124. June crude oil continued its losing ways, dropping $2 to $75.11/bbl. The Dow Jones Industrial Average shed 140 points to 10,379.
“This market just doesn’t want to go down,” said a New York floor trader. He added that with the exception of Thursday’s spike right when the inventory number was released “prices have been in a range between about $3.90 to $4.05 and everything else, the crude, gasoline, heating oil, was getting hammered. I have been looking for the market to test $3.70, but today it ran up at the end of the session.
“If the market comes in a little higher on Monday, I wouldn’t be surprised to see it run up to $4.25 to $4.30. I expect there might be stop-loss [buy] orders up at $4.15. The market is stuck in a range between $4.25 to $4.30 on the upside and $3.65 to $3.70 on the downside, and I expect it to remain that way for the next six to eight weeks.
“I don’t think today was a case of a market well bid below but rather it just ran out of sellers.”
The number of rigs drilling for natural gas eased. Oil field services giant Baker Hughes reported that for the week ended May 7, natural gas rigs fell five to 953, still well ahead of the 730 rigs drilling a year ago. The number of gas rigs has made something of a comeback from lows posted in July of last year when the count bottomed at 665 rigs. There is still a long way to go to reach the peak of 1,606 rigs of July of 2008, and prices are nowhere near the high of $13.694, also reached in the summer of 2008.
Market bulls got a boost from the morning’s release of April employment figures by the Labor Department. In March non-farm payrolls increased by a revised 230,000, and expectations were for gains in employment of 200,000 for April. The actual figure came in at a robust 290,000. The unemployment rate was expected to drop to 9.6% from March’s 9.7%, but it rose to 9.9% as the labor market expanded. Job gains occurred in manufacturing, professional and business services, health care, and leisure and hospitality, the Labor Department said.
The stellar jobs report, however, was not enough to quell investor fears still centered on debt-ridden European nations. The Dow Jones posted a fourth consecutive day of losses as did European stock indexes. The Stoxx Europe 600 Index fell 3.9%.
Observers point out that the natural gas market is unlikely to suffer the equivalent of the $11/bbl drubbing handed the oil markets this past week.
Jim Ritterbusch of Ritterbusch and Associates believes that “the large speculators are already heavily net short this market and as a result, the heavy liquidation process that has characterized the petroleum [market] this week has not been a significant element in this week’s natural gas trade.”
He added that overseas financial turbulence is “of only passing interest to the natural gas trade in which supply and usage are primarily restricted to the domestic market. The vagaries of the currency and equity markets are not significant drivers of natural gas prices.”
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