The July Nymex contract went off the board in wild fashionFriday, as the spot month reached a high of $2.45 before plummetingto a low of $2.33 just before the closing bell. Despite thevolatility, July’s final $2.358 settlement price left the contractdown just 0.6 cents for the day.
Several traders believe the late falloff turned in by July is aprecursor for what is to come when August debuts as the spot monththis Monday. “Even with all the fuss surrounding record breakingelectricity prices and the national heat wave, physical prices forJuly really haven’t budged much higher,” a marketer said. “I knowof several LDCs who have already starting selling gas for July.Obviously, that’s a double-edged sword. It tells you not only arethey not buying, but also that they think July prices may havealready hit a high,” he said.
August may see some short term technical weakness as well. Thecontract saw some pretty heavy selling as it approached technicalresistance at $2.50, so a broker believes the market could see somefollow through selling Monday. Plus, he feels August is “fairlyoverbought” on the weekly chart. However, the broker believesAugust will take its direction from July bidweek trading, andconsidering how crazy the power market has been lately, “who knowsfor sure what demand for gas will be like when we return from theweekend.”
If August does continue lower, the contract should receivesupport at $2.32, followed by $2.25, the broker added.
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