Powered by auxiliary generators and manned by just a fraction of the traders and staff that usually support the world’s largest energy market, natural gas trading at the New York Mercantile Exchange experienced a 30-minute delayed opening Friday due to the massive electricity blackout. But despite the paucity of traders, the outage, and the storm in the Gulf of Mexico (see related story), trading proceeded in a surprising orderly manner in the abbreviated session that concluded at 12:30 p.m. EDT. The September contract finished at $4.848, down 4.3 cents for the session.

As electricity was returning to the Northeast U.S. and Ontario Friday, cash and futures traders were beginning to ferret out the net impact of the outages on the gas market. Though some would suggest the long-term effect of the outage is bullish because it shows a need for increased spending on generation and infrastructure, most agree that the blackouts were price-negative for natural gas in the short run because it hurt gas demand for power generation.

And while turned-back supply was being felt in the cash market Friday in the form of lower prices, its impact may not be felt by the futures market until this Thursday when fresh storage data is released. Market-watchers noted that much of Thursday’s and Friday’s surplus supply was being injected into underground storage. And though it is still too early to tell, preliminary indications are that storage last week may have increased by an amount similar to the prior week’s 82 Bcf build.

“Storage was certainly bearish,” said Nymex local Eric Bolling about last Thursday’s report that left futures nearly 30 cents lower for the day. “Even the top end of expectations was only calling for an 80 Bcf fill.” At the same time, Bolling was also surprised the market was unable to muster even a modest short-covering rally Friday. “You could still see a delayed reaction Monday, but this is not a market that I am in any hurry to be long. You don’t need to be a hero and try and pick the bottom here.”

Instead, Bolling believes it is better to let the market build a base above July lows at $4.58. That, in conjunction with a narrowing of the spreads between contract months, would signal a possible turnaround. Specifically, Bolling points to the popular Oct-Dec spread, which after trading as narrow as 35 cents last week has blown out to more than 50 cents. “Until the spread narrows back down, this market is sending the message that prices have not reached a bottom,” he continued.

However, Craig Coberly of GSC Energy in Atlanta believes the price correction may have run its course. “This decline, while deep and vicious, is consistent with the longer-term bullish outlook…If this [outlook] is correct, additional declines — if any — should be minimal and gas should start to recover and move higher,” he said.

That being said, Coberly believes the best thing price technicians can do now is look for signs that the bullish case is not correct. Either of the following, in his mind, would plant the seed of doubt: a close below the 0.5-cent/day uptrend support line, which came in at $4.69 Friday, or trading below the July low of $4.58.

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