The price roller coaster continued in the natural gas pit at theNew York Mercantile Exchange Thursday as traders went through themotions of checking the latest hurricane forecast and then tradedaccordingly. Yesterday that translated into selling, by trade andlocals alike, as they reduced their long exposure on the news thatDebby had weakened into a tropical wave.
As expected the September contract bore the brunt of the bearishnews, tumbling all the way down to $4.40 support before trimming aportion of those losses during the last hour of trading. The promptmonth finished at $4.54, off 6.5 cents for the day.
“Trade was a pretty good seller, but support held and thatbrought in some light fund and end-user buying,” said Ed Kennedy ofMiami-based Pioneer futures, who had been watching the storm forboth professional and personal reasons. Debbie has weakened, butshe is not off the radar yet, he continued. “There exists thepossibility that she will regenerate in the Gulf and that willcreate some short-covering from those that sold on the move down[Thursday]. On the other hand, she could fizzle out, and withoutany more tropical systems out there, this market could bevulnerable to some downside.”
Looking ahead at today’s price action, traders are divided as towhether the market will make another run at trendline support at$4.40 or move higher in pre-weekend storm insurance buying. From ahistorical perspective, you can make a strong case for the latter,because the market has moved higher on each of the last fiveFridays as traders padded their books with longs ahead of theweekend.
And although that strategy paid off handsomely this week whenprices spiked higher Monday, it could back-fire as well, says PeterHattersley of New York-based Rafferty Energy Group. “We have strongup trend support from the daily chart at $4.40. If the marketbreaks below that level, look out.”
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