Natural gas futures trading on the New York Mercantile Exchange was scant Monday as a number of market participants took the day off to observe the Jewish Holiday Yom Kippur. While trading within a slim 13-cent range, November natural gas put in a high of $5.730 before settling at $5.643, up 2.3 cents on the day.
During the relatively quiet trading session, the winter contracts climbed a bit more than the front month. December finished 7.8 cents higher at $7.423, while January and February increased by 9.3 cents and 9.5 cents, respectively, to close at $7.893 and $7.973.
The upcoming winter weather picture remains the key for many as to which way the market heads. If cold temperatures were able to creep into heavy natural gas demand regions early, bulls might be able to gain some traction. Traction is exactly what bulls need a lot of ,considering the fact they are facing a whopping 3.254 Tcf of working gas in storage with five weeks remaining in the traditional injection season.
“It was definitely pretty quiet Monday in natural gas futures,” said Tom Saal, a broker with Commercial Brokerage Corp. in Miami. “I think there were more than a few absences on the floor during the day. As for price action, I think we saw a little bit of a continuation of the technical rally from last Friday’s regular trading session. At this point, the market is hinging off of the weather. I think the market is waiting to see what kind of weather shows up — or doesn’t — over the next few weeks.”
Looking at resistance levels, Saal said the market could easily get over $6. However, he sees the $5 level as being pretty strong support. “I just don’t see this market getting below $5 with the winter season approaching,” he said. “The weather will begin to start changing and some long-term forecasts are expected to drop soon, so we will see how it plays out.”
Other top traders are taking a “show me” attitude to those who suggest that the natural gas market is set to rise. If there are bullish fundamentals, they want to see them. Mike DeVooght of DEVO Capital Management points out that even though “the weekly gas storage number was slightly friendly,” it was unable to generate any significant market movement.
He said that from a trading perspective they will hold current positions and “will await the bullish news and then react to it rather than anticipate it.” He told clients that the bludgeoning of the winter months the past two weeks caused by fund liquidation will be closely watched to see if “there are any others out there that may have to throw in the towel. The gas market has come off a long way and continues to be very cheap relative to the complex on a Btu basis, so if it gets any bullish news, we could see a nice rally.”
Short-term weather conditions do not appear helpful to the bulls just yet. AccuWeather reports that the flow around high pressure to the south will send warm southwesterly winds surging into the Northeast, taking highs up to the 80-degree mark as far north as Pennsylvania and New Jersey. “Wednesday will also be unseasonably warm in the Mid-Atlantic, while a strong front starts to encroach on the warmth in northern New England and western New York,” predicts Bob Tarr, an AccuWeather meteorologist.
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