For the last several weeks the futures market has been a modelof volatility where one day’s gains were the next day’s losses.However, the market couldn’t make up its mind yesterday and afterabruptly spiking higher in the morning, ran into overheadresistance and subsequent selling that forced the market lower inthe afternoon. The October contract settled nearly unchanged forthe day at $2.186.
Sources generally agreed “hurricane hype” was the feature of theday as locals “got in, then out” of the market. One sources feltthe retracement lower from the $2.34 high basis-October was due tooverriding sentiment that a hurricane is “just a good sellingopportunity in disguise.”
The net effect on the physical natural gas market, if any, isstill hard to predict with the threat of Georges making landfall inthe US still several days out. Sources agree that it will depend onwhether the hurricane begins to make a gradual turn to the north,as was once forecast, or continues on its current track towardFlorida. Strategic Weather Services says Georges is expected toweaken as it passes over the high terrain of the Dominican Republicand Haiti Tuesday evening. They continued by noting that the longerGeorges is over land the more weakening will occur, but to expectthe storm to regain much of its strength during the next few daysas it moves back over water.
A Texas futures trader feels the market has tested allpossibilities the past two days by gapping lower Monday, thenhigher Tuesday. He says the market has moved in conjunction withthe storm’s intensity. “As the storm strengthened [Monday] eveningand [Tuesday] morning, the market managed to gather momentum andeventually rallied to $2.34. However, that was before Georges madelandfall in the Dominican Republic about mid-morning [Tuesday]. Atthat point traders realized there was no possibility for furtherstrengthening until early [Wednesday] morning. That prompted a waveof selling that beat October back down. However, I wouldn’t besurprised if the market makes another attempt at gains when traderscome back into the office [Wednesday] to find Georges intensifyingagain,” he said. Furthermore, the cold front forecast for theSoutheast that was expected to block and deflect the storm to thenorth has stalled somewhat in Alabama and Mississippi. That couldallow Georges to continue on its path, heading just to the north ofCuba on track to move southeast to northwest across Florida, hecontinued.
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