Continuing the downward trend, December natural gas futures fell 24.5 cents Friday to settle below the $8 mark at $7.954. For the week, the prompt month fell 77.1 cents from the previous Friday’s $8.725 close.

With its intraday chart resembling the hills of a roller-coaster, December futures notched its $7.70 low on the day at 12:27 p.m. (EST) before bouncing higher for the remainder of the session.

“Just as we have been saying, if we busted through that support level then the market was going to go, and it did,” said Steve Blair of Rafferty Technical Research in New York. “We really have come down and broken through a number of minor support levels. We are looking for the next major support level to be down around the $7.55 to $7.60 area.”

Blair said he believes that a lot of the bounce late in the day was probably short-covering ahead of the weekend. “Although the move is mostly technically driven, I still think a lot of traders want to disregard the big storage number on Thursday. Honestly, I can’t see how you can just ignore it,” he said. “The talk I’m hearing is that we are going to get another injection reported [this] week, the first week of the withdrawal season, which could push us above 3.3 Tcf. That is a lot of gas.

“I realize that if we have a severe winter, gas could get drawn down really quick, but as Gulf of Mexico shut-ins continue to reduce, I think it takes a little bit of the edge off the potential bullishness of the market.

Blair said he believes that the market was way overpriced to begin with when it was up in the $8.50 to $9.00 area. “I really think that the market is shaking itself out now,” he said. “We won’t answer it this week, but the question is how much of the funds did we shake out with this move. This coming week’s Commodity Futures Trading Commission numbers are liable to be very interesting.”

Chiming in on the market’s direction, IFR Energy Services’ Tim Evans said December’s visit to $7.70 on Friday was a near retest of the $7.685 low from back on Oct. 13. “We see failed resistance at $7.40 as the next possible support, giving the market a chance to consolidate or even stage an upward correction off this support, although we think the market could tumble considerably farther, given the extent of the [storage] surplus and how elevated prices had become,” he said.

“On the upside, the $8.255 high for the session and failed support at $8.46 block access to the downtrend resistance at $8.76 although, frankly, we think the slope of that line is already out of date,” Evans said. “We doubt the market will have interest in a further review of the higher levels now that the equilibrium has quite clearly been broken.”

Evans noted that the 44 Bcf net injection to U.S. natural gas storage for the week ended Oct. 29 is just the latest installment of a bearish storage trend that has been in place for months. “To review, the market has gone from a year-on-five-year average deficit of 163 Bcf back on Feb. 20 to a surplus of 239 Bcf as of Oct. 29,” he said.

The New York Mercantile Exchange announced Friday that a record 147,153 off-exchange contracts were cleared through Nymex ClearPort Thursday, exceeding the previous record of 137,195 contracts on Sept. 16, 2004. Nymex said open interest as of the close of business Friday, Oct. 29 was the equivalent of approximately 25 million MWh of electricity, 2.12 Tcf of natural gas, 106 million barrels of crude oil and refined products, and 1.6 million tons of coal.

“Today’s Nymex Clearport clearing volume record is a significant accomplishment,” said Exchange President James E. Newsome. “Contracts cleared before year-end 2004 are almost double in volume compared to last year’s total contracts cleared.”

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