Natural gas futures at the New York Mercantile Exchange haveconsistently featured choppy trading, high daily volatility, andprice erosion for the last several months. And expiration dayTuesday was no different as traders tested both sides of a largetrading range before depositing the January contract 2.3 centslower to its final resting place at $1.765. And in doing so, theJanuary contract tumbled over a half dollar during its reign as theprompt month.

Few traders were surprised by the futures minor losses despitecash prices that either held their ground or experienced modestincreases. In fact, some were looking for January to broach the$1.70 level yesterday. “The tone for expiration was set when themarket gapped lower at the open [Monday],” a Dallas marketer said.

But a Houston marketer thinks there might still be hope for theFebruary contract, which makes its debut as the spot month today.”Forecasts are in agreement that below-normal temperatures arereturning to Chicago by this weekend. It may not happen as soon as[Wednesday], but I look for a slow grind higher by week’s end.”

However, the Pegasus Econometric Group takes a more macro, andtherefore bearish, approach based on the weather and storagesituation. The group is looking for a net withdrawal of 100 Bcf intoday’s American Gas Association Storage Report, which iscomparable to the 96 Bcf from 1997. “The problem will be that a 4Bcf drop in a 700+ Bcf surplus won’t exactly spark a short-coveringstampede. The long-term forecast for warmer than normaltemperatures in the central U.S. will be a further factor limitingthe upside,” the group said.

©Copyright 1998 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.