Taking a cue from Wednesday’s Access trading session, thefutures market probed lower yesterday as weak longs and speculatorstook profits away from the price rally earlier this week. TheNovember contract was dealt the largest blow, slipping 13.6 centsto finish at $2.834. December closely followed by tumbling 10.8cents to $3.051.

Despite the downward correction, many market watchers remainoptimistic of higher prices moving forward. “You can’t blow up aballoon, without taking a breath,” was a Northeast aggregator’sanalogy to describe Thursday’s price deflation. “We bounced off the$3.03 level pretty hard [Wednesday]. This was just a correction.”He feels that prices will receive a boost with the onslaught ofcold temperatures early next week.

But for Tom Saal of Miami-based Pioneer Futures, next week maybe too late. “The key to sustaining the rally is a weeklysettlement above $2.81. That would turn the weekly continuationcharts positive. Right now the market is in a cycle of buying whenthe six- to 10-day forecast calls for cool temps and then sellingwhen the weather actually shows up. Clearly the trend is still upand the volatility is here to stay,” he said.

For some, however, the burgeoning level of storage is a bearishfactor that cannot be overlooked. Bears contend that yesterday’sprice slide was precipitated by a larger-than-expected storageinjection Wednesday night. Taking into account the 49 Bcf refill,storage is now just 16 Bcf less than last year’s record level.

Saal disagrees, maintaining that although storage is nearingfull capacity, it still only constitutes “potential supply,” whichbecomes a factor only when it is withdrawn. Saal is recommendingthat his buyers be ready for an opportunity in the next severalsessions. “It’s easy to like $2.82 prices in October when youremember $2.92 levels in September.”

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