After gapping lower at the open for the second day in a row,natural gas futures continued to free-fall in lackluster holidaytrading Monday. Weak cash market pricing and a quicklydeteriorating technical picture were cited as reasons for the10.2-cent decline in the November contract. By settling at $2.089,November has dropped over 30 cents in the last three tradingsessions.

A source said the recent declines have been fueled by fundsgroups squeezing out of long positions. “Funds enter and exitpositions differently from locals. Whereas locals hit the markethard, funds typically enter and exit in an orderly manner,” hesaid. The CFTC released the bi-weekly Commitment of Traders reporton Friday which showed non-commercial traders were net long over8,000 positions as of Oct. 6. Now the question becomes when andwhere the speculators will begin to rebuild their positions. Theaforementioned trader feels that is a difficult question. He does,however feel they will be “a little bit more discriminant” the nexttime they step into the market.

Another source feels this is a pure case of futures trendinglower to stay inline with the physical market. “Cash traded in thelow $1.70s [Monday] and bids will come out in the $1.60s [Tuesday].Futures have struggled to keep a 35 cent premium and based on thatI fully expect futures to test the $2.03 level [today].”

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