With petroleum futures climbing on expected July 4th holiday demand and the possibility of a significant storm hitting the Gulf of Mexico early this week, natural gas futures traders on Friday weren’t taking any chances. Halting the recent slide in prices, August natural gas futures rebounded higher in shortened trading Friday, crossing back above the $7.00 level to settle at $7.171, up 19 cents on the day, but 24.1 cents lower than August’s previous Friday settle.
“With that weather system that is going to be forming in the Gulf of Mexico on Monday, everybody was afraid to go home short,” said Ed Kennedy of Commercial Brokerage Corp. in Miami. “If you went home short, and the storm developed into a hurricane on Monday, you can’t do a damn thing about it until Tuesday.
“So we had a little short-covering…and of course natural gas sellers were being thrown to the sidelines with the possibility of a hurricane in the Gulf,” he said. “That’s pretty much it. The sellers were frozen in the headlights Friday.”
AccuWeather.com on Friday said it is watching a tropical wave in the central Caribbean that “is moving into an area favorable for [tropical storm or hurricane] development. We are also monitoring a strong tropical wave in the central Atlantic that will affect the Lesser Antilles Sunday and early [this] week.”
AccuWeather.com’s Joe Bastardi noted that the tropical threat could become “as strong as a hurricane.” The meteorologist said he expects it to hit the Gulf Coast early this week. “”Here we are on the July 4th weekend, and we have a potential big problem for early [this] week,” he said.
The Accuweather take on the pattern was backed up by the National Hurricane Center, which believes that the upper level winds may become more favorable to storm development in the region over the weekend and early this week.
In addition to storm concerns, the petroleum sector also helped buoy natural gas. After three consecutive days of significant declines, August crude gained $2.25 Friday to settle at $58.75/bbl. Likewise, August heating oil climbed a whopping 7.5 cents to close at $1.7111/gallon.
IFR Energy Services Tim Evans said trading patterns prior to a holiday weekend have certainly changed. “Once upon a time, a short pre-holiday trading session would have been a reason to sit back and wait to see what would happen, or even a chance to slip out to the golf course instead of trading,” he said. “That’s hardly the case today though.”
Summing up natgas trading on Friday, Evans said, “The possibility of storm development is helping natural gas climb, but that’s something we thought it was due for anyway.”
Prior to the storm news, analysts had been expecting the natural gas futures complex to continue to trek lower. “We still view the line of least price resistance to the downside. The pre-expiration low of $6.90 in the July contract provides a short-term downside target to August futures,” said Jim Ritterbusch of Ritterbusch and Associates, prior to trading on Friday.
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