In what may have been a Pyrrhic victory for bulls, natural gasprices cruised to its seventh straight advance yesterday as tradeand local buyers took the February contract to its highest level inalmost a month.

That, however, is where the price positive news both begins andends because no sooner had the spot month topped the $2.46 levelthan sellers aggressively liquidated their positions. Bruised butnot beaten, February managed to escape the session with a modest3.4-cent gain to finish at $2.417.

Even with the coldest air of the season still firmly entrenchedin the gas-sensitive Northeast, it was difficult to find anyonewith anything positive to say yesterday. “This is nothing more thana blip in an otherwise bear market,” said Ed Kennedy of Miami-basedPioneer Futures regarding the two-week, 30-cent price rally. We sawsome light trade and local buying today but the funds remained onthe sidelines.”

Kennedy and many other market watchers kept a close eye on thefunds or non-commercials yesterday to see if they stepped as buyersnow that the February contract has punched through its 40-daymoving average at $2.382. “They have been, and continue to be,notably absent in this market.” Kennedy added. “We have a good ideaof what their appetite [for natural gas futures] can be, and thisisn’t it.” That appetite is fueled by their knack for switching toa long position during periods of up-moves and to the short sideduring down-moves. According to the last Commitment of TradersReport released by the Commodity Futures Trading Commission, thenon-commercial traders held a net short position of 18,159.

However, the lack of speculative buying yesterday may be theleast of the bulls’ problems after the bearish one-two releasednearly simultaneously by the American Gas Association and theNational Weather Service Wednesday.

According to the AGA, 110 Bcf was withdrawn from undergroundstorage facilities last week, reducing the total gas in undergroundstorage facilities to 2,212 Bcf. And if you think that is a lot ofgas still to have in storage in mid-January, you are absolutelycorrect. In fact, not since the AGA began tracking storage back in1994 have storage levels been this high in mid-January. Last yearstorage was 2,209 Bcf and the six-year average for this week is1,890.

And to go along with that price-bearish supply scenario, the NWSan equally depressing demand outlook. A medley of above- andmuch-above normal temperatures is on tap for the eastern two-thirdsof the country next week, according to the latest six- to 10-dayforecast. The West, on the other hand, will see below-normalreadings for that period.

©Copyright 2000 Intelligence Press Inc. All rights reserved. Thepreceding news report may not be republished or redistributed, inwhole or in part, in any form, without prior written consent ofIntelligence Press, Inc.