Adding to losses notched in Monday’s open-outcry session,natural gas futures gapped lower at the open yesterday and neverlooked back, as traders liquidated positions ahead of today’sstorage report. The February contract took the selling squarely onthe chin, tumbling 51.1 cents to close at $6.946. Estimated volumewas weak as only 42,671 contracts changed hands.

Following a two-day, 55-cent price rally late last week, traderswere ready for the market to give back some ground. Weatherforecasts are benign, with the National Weather Service calling forabove-normal temperatures for the East through the rest of themonth. Meanwhile the market is entering a period of time when itwill likely see some very negative year-on-year storagecomparisons, analysts agree.

According to estimates by New York-based IFR Pegasus, theAmerican Gas Association will report at 120-130 Bcf withdrawallater today, up from last week’s 103 Bcf pull, but downconsiderably from the 195 draw of a year ago. However, thebearishness does not stop there. The forward contrasts lookchallenging too, the group continued, with weekly tallies last yearof 242 Bcf and 213 Bcf before facing an easier 158 Bcf comparison.Because of that, Pegasus believes that a breach of support at $6.80will likely lead to an investigation of the $6.30-50 area orpossibly down to the spot low from Nov. 28 at $5.90.

However, for Nymex local Ira Hochman, it is not so simple. Whilehe admits that prices could bleed lower in the long term, Hochmanbelieves that February could see a little bounce Tuesday night andWednesday morning. “The market’s inability to re-test prior lows at$6.80 tells me that the sellers lacked conviction yesterday. Weprodded down to $6.90, but they couldn’t take it any lower… Themarket actually developed a little down there and that’s positive.”

A similar thing occurred in earlier this month when the Februarycontract was unable to re-test the $9.925 high notched late inDecember, Hochman continued. “We got back up to $9.87, but theinability to push to new highs proved the buyers were notaggressive.”

In daily February technicals, support exists at theaforementioned $6.80 level, which corresponds to the Jan. 17 low.Additional support is seen at the bottom of a chart gap down to$6.65 dating back to Dec. 1. Resistance is at the top ofyesterday’s gap lower at $7.41.

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