After recording consecutive new lows on Wednesday and Thursday, the December natural gas futures contract on Friday halted the streak and pushed higher. The prompt-month contract — which terminates on Tuesday — recorded a high of $4.442 before closing Friday’s regular session at $4.424, up 8.2 cents from Thursday’s finish and 3.2 cents north of the previous week’s close.
“While the market on the whole was still pretty quiet on Friday, I do have to admit that I did quite a bit of buying for end-users,” said a Washington, DC-based broker. “I’m not sure what brought them in. Maybe because it is bidweek or because the price didn’t record a new low Friday like it had on Wednesday and Thursday. Buyers just showed up. Despite the activity I was involved in, it did not add up to a whole lot pricewise. We’re still doing some backing and filling, in my opinion.”
She noted that the market still has a little ways to go before erasing the gap at $4.035 from back on Sept. 25. “The attack on that gap has been pretty slow. Typically when we have a gap like this, we break right through. However, this time around it has been a tough slog.”
Commenting on the December contract’s upcoming expiration on Tuesday and the arrival of the Thanksgiving holiday on Thursday, the broker said she feels market participants shored things up earlier this month and are already out. “I’ve had a lot of people who have already squared away their positions. I think everyone has dreams of turkey dancing in their head. Traders are looking to get December off the board so that they can get the heck out of here. I don’t expect volumes to be very large during the holiday week.”
The broker said the market basically gave up on following the storage reports a couple of weeks ago. “Yes, another 20 Bcf was added to underground inventories, which was well within expectations, but the fact is the market long ago took into account the fact that we have more gas than we know what to do with entering this winter,” she told NGI. “The big issue is all of the talk of a cold winter, but looking outside you can’t see or feel any of it yet. At some point people are going to start losing their patience, but it also is not even the winter solstice yet, so we have a little ways to go there.”
Some top analysts urge caution in trying to pick a bottom to the market until the weather outlook shifts to a demonstrably colder regime. “Despite [the] rebound, we would caution against attempts to pick a bottom to this sharp price decline in the absence of definitive indication of a shift toward unusually cold temperature patterns,” said Jim Ritterbusch of Ritterbusch and Associates.
More importantly, in the long run Ritterbusch thinks the natural gas market is grappling “with a shifting perception that the economic recovery may be falling short of prior expectations. In other words, this year’s dramatic gain in the stock market may not prove indicative of actual improvement across key sectors of the economy as suggested by this week’s lower-than-expected growth in industrial production and housing activity.”
Technical analysts who follow Elliott Wave and retracement analysis see the market in somewhat of a no-man’s land and needing to break higher or lower to reveal its next move. December futures need to advance to firmly establish an uptrend. “Natgas reversed sharply after testing our pivotal $4.225-4.207-4.183 support zone. Because of this rebound Thursday’s candlestick can be classified as a potential doji star bottom,” said Brian LaRose, an analyst with United-ICAP. He suggested that a confirming rally is needed. “A close above $5.106 is needed to indicate a seasonal advance is still under way. Bears need a close below $4.183 to signal this year’s advance ended at $5.318.”
Â©Copyright 2009Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.
© 2021 Natural Gas Intelligence. All rights reserved.
ISSN © 1532-1231 | ISSN © 2577-9877 |