In a trading session that won’t soon be forgotten by bull norbear yesterday, natural gas futures marched easily higher as earlylong accumulation by funds morphed into a buying free-for-all whencommercials and locals entered the ring. After setting its dailylow during the first hour of trading at $5.80, it was up, up andaway for December, as it notched a new all-time commodity high at$6.025. The prompt month finished 31.8 cents higher on the day at$6.016. Meanwhile, soon to be spot month January was no slouch,gaining 29.6 cents to close at $6.002.
After checking lower on the open, technicians were focused onkey intra-day support and resistance numbers at $5.835 and $5.895respectively. A break either above or below those numbers and themarket would likely continue in that direction, they said.
Other sources took a step back from the technical side of themarket to focus on the impact of record high prices. “There is nofundamental rhyme or reason for these prices,” said a broker. “This isnot supply and demand. There is storage in the ground and rig countscontinue to rise. Sure, November will likely be a little chillier thanusual, but is anyone not able to buy gas because of lack of supply? Isanyone being told there is no more gas? The only ones that are unableto buy gas are the ones that are out of business because they can’tafford to pay these prices. The fertilizer companies (see Daily GPI;June 30), the aluminum producers, thesteel makers — these are the ones that are affected by these higherprices and the impact on them is profound. There is not one glassproducer in the U.S. that is making a profit with natural gas pricesat $6. The only reason they are still delivering a product is becauseof their loyalty to their customers.”
Now that prices are in uncharted territory, the question becomeshow much higher will they go. While some traders will have a hardtime resisting attempts to pick a top, George Leide of NewYork-based Rafferty Energy Group is not about to get in the way ofthis bull run.
“You can’t try and pick a top up here. You just have to becognizant of weakening momentum.” The first chink in the market’sarmor would come on a move below an hourly up formation line thatcomes in at about $5.92 and moves up at the rate of about 2 centsevery hour. However, Leide will short this market much moreconfidently if the December contract is able to fill in the stringof recent gaps down to $5.74. “That would tell me that a top is inplace and a correction, possibly down to $5.10-20, is underway,” hesaid.
Although it is somewhat overshadowed by the astronomic priceincreases, the weekly storage report will be released at 2:00 p.m.(ET) this afternoon. Early talk calls for either a refill or awithdrawal of less than 30 Bcf. Historically, the market haswithdrawn an average of 21 Bcf (six years) and during the last fiveyears the market has pulled 27 Bcf. However, market watchers arewary that mild weather last week and low storage levels hasprompted storage operators to top off their supplies. Last year atthis time the market injected 9 Bcf.
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