Pressured by a steady stream of local and fund selling, naturalgas futures slid lower yesterday amid an improving winter storageoutlook and continued mild temperatures across the nation. TheNovember contract took it squarely on the chin, dropping 25.2 centsto close at $4.82, almost a dollar below its Oct. 12 high.

Each time the buyers stepped up to buy at new lows, locals werethere to sell into it, said Ed Kennedy of Miami-based PioneerFutures. However, the clues to yesterday’s price demise wereapparent even before the opening bell. Looking at a 60-minuteNovember chart Tuesday morning, Kennedy was able to identify theexistence of a short-term downtrend line as well as over-boughtconditions, which led him to believe that prices were heading loweryesterday. Only a break above November’s 40-day moving average at$5.202 Tuesday would have turned him bullish, he said.

Looking ahead, he believes support in the upper $4.70s will holdin the short-term, prompting shorts to take profits ahead oftoday’s release of new storage data.

While the official figures will not be known until thisafternoon, preliminary expectations, calling for a 45-65 Bcf weeklystorage injection, were circulating around trading floors acrossthe country yesterday. If those estimates are correct, it could beviewed as bearish compared with the 13 Bcf refill seen during thesame week last year. Meanwhile, the five-year average is a 44 Bcfbuild, according to the AGA.

However, Tim Evans of New York-based IFR Pegasus doesn’t ruleout a bullish reaction to Wednesday’s storage report. Evans notedthat market reaction to storage reports often is hard to predict.”Fundamentally, what we think we’ve learned from this exercise isthat the market is either ignoring or at least putting anopportunistic spin on the AGA report and reacting much more insynch with the current weather pattern instead. This suggests thatwe can’t count on a bearish reaction to Wednesday’s data, eventhough the estimated refill of 50-60 Bcf will be worlds higher thanthe 13 Bcf tally from a year ago. It may be the case of sell therumor, buy the news and look immediately ahead to the next week’sdata, all within the first two minutes after we see the figure,”Evans wrote in his daily market commentary.

In daily technicals, Kennedy sees support first in the $4.78-81area, which corresponds to failed resistance on the move higher.Secondary support exists at the weekly continuation chart high of$4.715 notched on June 27.

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