Taking a cue from Thursday’s Access trade sell-off, the futuresmarket continued lower Friday as traders fully discounted thecurrent trio of storms by aggressively exiting their longpositions. By 2:40 p.m., the September contract had fallen justshort of filling in the chart gap down to $2.805. However, $2.83was all that the sellers could muster and prices rallied in thelast 30 minutes of trading. The September contract settled at$2.912, down 3.6 cents for the day but up more than 8 cents fromits earlier low.

Thompson Global Markets said last week’s profit-taking was justthe start of a more significant bout of long liquidation. “Withtotal open interest at 385,111 as of Wednesday’s close, we thinkthere is a degree of speculative excess in this market that cannotbe corrected in one or two sessions. Fundamentally, we estimatethat even with Hurricane Bret causing some shut-ins over lastweekend, net injections to AGA storage will fall in the 50-60 Bcfrange as cooling requirements for the week are also lower. Thatwill be relatively neutral relative to last year’s 57 Bcf refill,”the group wrote in its Pegasus Power Report. But the real bearishrisk, they continue, comes with the Sept. 8 storage report, whichwill be compared with the relatively small 30 Bcf refill from 1998.

Susannah Hardesty of Indiana-based Energy Research and Tradingagrees and believes barring additional hurricane fear, prices willdrop dramatically into early to mid September. “Hurricane concernswill cause short-term spikes, but as long as there is no seriousproblem with production in the Gulf, we will get a second bottom ofthe summer low, at significantly lower levels,” she wrote in herAug. 26 Natural Gas Weekly Report. Hardesty’s best estimate is forthat low to occur between $2.62 and $2.35. However, in the eventthat the tropics quiet down, she looks for prices to continue evenlower, bottoming out between $2.30 and $2.10.

According to Jesse Kosch of Omaha-based Strategic WeatherServices, we are in the clear in terms of new storm development, atleast until the beginning of this week. Despite the activity wehave seen over the last week and a half, it remains quiet for nowoff the coast of Africa and in the Gulf of Mexico, he said. Andwhat about the storms that are already out there? Almostnon-factors for the Gulf, he continued. Dennis is expected to comeashore near Charleston, SC, Sunday, and Cindy is headed to Iceland,he said, half joking. The one to watch out for is Emily, which hasbeen severely weakened (downgraded to a tropical depression Friday)by wind sheering associated with Cindy, but still poses a threat ofreorganizing and strengthening.

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