High volatility continued in the natural gas pit Tuesday whentraders tested both sides of the market during a session that sawlittle in the way of fresh fundamental news. In the end, supportivecash prices-that were up 20 or more cents in mostlocations-provided the incentive for futures to trend higher. TheDecember contract led the way, eeking out a 4.9 cent gain to settleat $2.436 in light to moderate trading activity yesterday.
Although the market has rallied more than 16 cents this week,there remains some skepticism as to whether the gains are here tostay. One source said the lack of sizable volume or open interestthat has accompanied the advances makes the market vulnerable to asnapback to last week’s levels. A Gulf Coast trader disagrees,adding the futures market was just looking for some reassurancefrom cash prices before it could move higher.
But in order for the market to continue higher, traders willfirst have to digest potentially bearish weekly storage datareleased this afternoon. Whereas last year the market withdrew 5Bcf from storage, market estimates call for an injection in the15-45 Bcf range this in today’s report. A Houston-based marketersaid he would be shocked to see another injection. “Last year wehad a withdrawal, but expectations called for awarmer-than-expected winter. The reason why storage is so full thisyear, is the same reason why there won’t be a withdrawal [today].People are preparing for a colder-than-normal winter, and untilthey see otherwise there will be a continuing reluctance towithdraw supply.”
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