The futures market followed an early example set by the cashmarket on Tuesday, as early selling fueled by losses in Monday’sAccess trading pushed the market lower for the second day in row.That enabled the November contract to not only gap lower at theopen, but also to gap below key support at $2.35 on its way to alow of $2.295. However, the buyers saw good value at those levelsand bid up the contract to its settle at $2.346, a 4.7 cent lossfor the day.

The nearly 35-cent differential between November futures pricesand current October cash prices at the $2.00 level has become ahotly debated topic lately. One Houston-based marketer feels thecash-futures basis is, if anything too narrow. “What you have isthe difference in pricing between a shoulder month where gas inplentiful and storage is nearly full and the front month of thewinter strip. I’d say 40-45 cents is not an unreasonabledifferential. So the economic incentive is there to put gas intothe ground, but there is still excess gas in this market and thatwill weigh on prices throughout the month.”

Another source agrees, but doesn’t rule out the chance for arally ahead of the AGA storage report to be released thisafternoon. “I look for bulls to take this opportunity to tryestablish a run [Wednesday] before the potentially bullish storagenumber is released. I expect a refill in the 20-40 Bcf range, whichwould help create a nice little pop in access trading. However, Idon’t see much follow-through buying on Thursday, and we could beheaded down to $2.20 futures in a hurry.”

©Copyright 1998 Intelligence Press Inc. All rights reserved. Thepreceding news report may not be republished or redistributed, inwhole or in part, in any form, without prior written consent ofIntelligence Press,Inc.