Following a spectacular, 24-cent price spike Thursday, thenatural gas futures market cooled its heels Friday as traders tookprofits rather than spend the weekend long. That allowed theOctober contract to sift a nickel lower to $2.801 in an active114,602-volume session.

For many, the big question Friday was whether the Henry Hubfirst of month index at $2.90 would prove to be a minor speed bumpor a major roadblock. That question was answered succinctly whenafter the over-the-counter market was bid up to a high of $2.94,cash opened with a “disappointing” $2.88 trade, a Houston riskmanager explained

Several traders contacted by NGI commented on the remarkablevolatility that continued to plague the market Friday. “[October]was up to $2.92, then back down to $2.73 in the first two hours oftrading alone,” exclaimed one haggard Chicago trader. But despitethe choppy trading activity, he believes that prices will movelower in the intermediate- to long-term. “There is simply nofundamental justification for these prices. Congestion in the $2.60area will be the market’s first stop. After that, I look for pricesto move to the low $2.40s before bargain buying kicks in,” he said.

“Daily charts were looking a little bullish, but I don’t thinkanybody anticipated the run we saw Thursday,” added a Dallas-basedmarketer. “That just shows you how vulnerable this market is to alittle hurricane hype. It will be interesting to see where[Hurricane Floyd] is come [Monday] morning.

Another Gulf trader agrees that the price direction will belargely determined by the location and updated forecasts thismorning. But Floyd, with its maximum sustained winds of 80 mph, wasnot alone Friday. As of press time at 6 p.m. the National HurricaneCenter was tracking three new storm systems in the North Atlantic.Although none pose an immediate threat to land, they are allexpected to strengthen.

Looking ahead, a Houston risk manager remains bullish andpredicts that even if the tropical storm systems aren’t able totake the market higher, speculators will. “The funds have added totheir length Tuesday, Wednesday and Thursday and that does notsurprise me. They have been very successful recently and continueto make higher highs and higher lows. They get long on the move upthen liquidate on the move down. Settling above the 40-day movingaverage Tuesday once again gave them the green light to add totheir positions,” he reasoned. And liquidate they did. Afternotching a record high net long position of 59,880 on August 24,the non-commercial segment scaled back their exposure to 23,036 asof Sept. 7, according to the Commodity Futures Trading Commission.

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