Wiping out the bulls’ aspirations as well as their gains from Thursday, March natural gas futures followed Thursday’s 15.6-cent gain with a 15.9-cent loss on Friday to finish at $4.417, down 7.6 cents from the previous week’s close.
Commenting on the strange sequence of a 15-cent gain Thursday being followed by a 15-cent loss on Friday, Rafferty Technical Research broker Steve Blair said only one of the moves made sense to him, and it wasn’t the one on Thursday.
“I’m not really sure what Thursday’s rally was all about unless it was just some short-covering off the slightly larger-than-expected 186 Bcf storage withdrawal report,” he said. “However, if you look at everything on the whole, it was not a tremendous draw for January. We have more gas currently than we did last year at this time and we are also still ahead of the five-year average. We still have a ton of gas in storage and I don’t see that changing anytime soon.”
Blair noted that the hopes of bullish traders were snuffed out pretty quickly on Friday. “We made a run higher Friday morning as the bulls tried to capitalize on Thursday’s momentum, but it ended up collapsing. I think it just shows the bears are still firmly in control of this thing. It looks like March is simply picking up where February left off.”
In the near term, the broker said he’s not sure the bulls can gather enough supportive indicators to turn the tide for prices. “A lot of the near-term forecasts are calling for above-normal temperatures for most of the country, so I don’t see the bulls taking over in the near term,” Blair said. “Is a breach of $4 in the cards? I won’t say it’s not possible. As we’ve seen over the last few months, anything appears to be possible. I don’t see this market rallying in any real way for the near term. We’ve seen the end of January, so we only have about a month left where we could see true cold. I don’t know whether that is going to be enough.”
Traders on Friday morning absorbed a somewhat better than anticipated report on Gross Domestic Product (GDP), but a worse than expected study of durable goods orders. The economic landscape remains grim. Thursday the Commerce Department reported that orders for December durable goods, an important leading indicator of manufacturing activity, declined 2.6%, above analysts’ expectations of a 2% decline. The Friday release of preliminary estimates of Q4 GDP, one of the broadest measures of economic activity, showed a decline of 5.1%, lower than expectations of a decline of 5.5%. The figure was somewhat improved when inventories were tabulated, bringing the decline to 3.8%. In either case this is a sharp contraction from Q3 in which GDP declined 0.5% and would be the weakest reading since 1982.
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