Looking to bust out of the $5.95 to $6.27 trading range, traders of March natural gas futures explored lower on Monday, breaking below the psychological $6 barrier once again. Despite reaching a low of $5.97, the prompt month climbed in the afternoon to settle at $6.093, unchanged from Friday’s close.

While Monday’s pattern was familiar from last week’s trading, the direction was not. On Wednesday and Thursday of last week, March natural gas made runs higher in the morning, only to slough off and settle relatively unchanged (see Daily GPI, Feb. 11).

“The market was very, very quiet Monday. There was really not a lot of volume from what I understand,” said Steve Blair of Rafferty Technical Research in New York. “We bopped under that $6 level, which is our first minor support level, but we quickly came right back up. I just don’t think there is enough impetus to really push it through one way or another.”

As for what the market’s near-term direction is, Blair said he believes there is a little more room to explore lower. “We have bounced off of this minor support level at $5.95-5.97 a number of times. I think we will probably continue to test support lines,” he said. “The market will definitely find some support down in the $5.70s, but I really don’t think we could go any lower.”

The failure of futures to move higher has observers thinking that the current ability to hold the $6.00 technical support level may be illusory. Last week’s modestly supportive withdrawal from working gas inventories was unable to lift prices higher. “A choppy market unbelievably remains intact. We honestly can’t remember the last time the daily ranges and absolute price changes were so small for three days in a row,” says Kyle Cooper of Citigroup.

The failure of the market to rally after numerous reasons to do so last week calls into question the possibility of heading lower, he added. “Withdrawals over the next two weeks are expected to be rather small from a historical and yearly perspective.”

The Commodity Futures Trading Commission (CFTC) reported Friday that as of Feb. 8, noncommercial holders of futures (only) contracts nominally increased their net short position from 30,535 contracts to 31,988 contracts. The latest report showed a shift from the recent trend. The two prior reports revealed sizeable net short position decreases by the noncommercials (see Daily GPI, Feb. 8).

The fairly large short position is viewed by market bulls as a positive factor as it is believed that a price advance will cause noncommercial holders to buy back their positions and exacerbate any price advance already under way.

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