In its debut as Nymex prompt month, the July natural gas futures contract was a bull’s dream Friday as it surged higher to nearly erase losses suffered in sympathy with Thursday’s expiration-day June contract liquidation. A combination of speculative short-covering and end-user buying were cited as factors in the rally that propelled July up 15.8 cents to $6.370 Friday, two ticks shy of Wednesday’s $6.372 close. On Thursday, the June contract tumbled 19.2 cents to go off the board at $6.123.

After having been stuck in a slow methodical march lower for most of the month of May, the price action of late last week took many traders by surprise. And while market watchers disagreed on what to make of the topsy-turvy trading, they agreed that the price bottom — if not already reached — may not be too far away.

“What we saw [Friday] was just a little bit of pre-weekend short-covering,” offered Brad Florer of ICAP Energy. “Thursday’s decline came on expiration and Friday’s rally came in an abbreviated session before a holiday weekend and after a contract expiration. I haven’t seen the volume figures yet, but my guess is that it was very light volume [Friday],” the Kentucky-based broker noted. Volume was later estimated by the exchange at 37,949, a very light level of trading activity.

Local trader Eric Bolling, who was not in the pit Friday, echoed that sentiment. “For three weeks we saw tiny daily trading ranges. The market felt heavy, but it made very measured declines. Then it dropped hard [Thursday] on expiration day. I still think we will see sub-$6.00 prices, but Thursday’s decline was too much, too soon.”

Bolling also noted that Thursday’s declines were not evenly distributed across the Nymex strip. “June and July got crushed and the winter held its own. The spread values really blew out. What it looks like we had [Friday] was a bit of a correction.” Bolling may have a point. On Thursday the June and July contracts sank 19.2 and 16 cents respectively, while the December and January contracts suffered setbacks of just 5.1 and 3.1 cents respectively. To mitigate the risk of buying outright long or short positions, local traders typically buy and sell spreads. This entails the simultaneous purchase and sale of different months.

For Bolling, Thursday’s sell-off in the front months lacked credibility because it was not authenticated by similar selling in the winter months. After widening by nearly 11 cents to $1.327 Thursday, the July-December spread snugged a bit to $1.282 on Friday. Still, Bolling is bearish on the front end of the strip and would not be surprised if the spread widened a bit more. if and when the market makes another try at the $6.00 mark.

Though he admits that bulls might get excited by July’s higher high on the daily chart, Florer remains a cautious bear. “There is just not a lot to be bullish about,” he said, pointing to the plentiful storage and mild weather.

But the downside is limited too, he continued. “The market is running out of momentum. Rather than a typical downtrend with sell-offs and rebounds, this move has been more of a relentless drift lower.” That said, Florer does not expect the market can plunge much deeper than the $5.84 level.

However, some market-watchers believe it is now bulls’ turn to drive this market. “At least in the short run, we think the market has put in a bottom,” said Ashmead Pringle of GSC Energy in Atlanta. For Pringle, not only is the timing right for the bottom (before the summer cooling season), but the price is right. Pringle notes that in a world where the 12-month strip has a $6 to $9 range, last week’s bottom below $7 “wasn’t too bad.”

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