Adding to gains achieved in the overnight Access tradingsession, natural gas futures were higher at the open Friday astraders kept close tabs on a tropical depression that as of presstime Friday posed a threat to production platforms in the Gulf ofMexico. However, after etching a new prompt month high for thethird day in a row Friday morning, the October contract was hitwith a long and steady sell-off throughout the afternoon as tradersheaded for the exits ahead of the weekend.
When all the dust had settled and the orders tabulated in thedata room at Nymex, October managed to stay above unchanged, up 1.1cents at $5.206. The winter strip tumbled 1.3 cents to close at$5.183.
“It’s a very large weather play right now,” said a Houston-basedrisk manager. “We saw lots of sellers throughout the afternoon[Friday] and who can blame them. Some of them were long from Mondayand Tuesday at much lower prices and didn’t want to roll the diceafter having set a new contract high [Friday]. If the stormdissipates over the weekend, we could have a gap down on the openMonday, and that’s unrealized revenue for them.”
However, Friday’s price erosion could be just the beginning,adds Tim Evans of New York-based Pegasus Group. “If TropicalDepression 11 does strengthen as forecast over the weekend, itcould be Hurricane Gordon that threatens the Gulf Coast early nextweek. However, this will make market timing trickier than ever asprice peaks normally arrive just ahead of the storm itself. Thismay warrant checking the Weather Channel Sunday afternoon andselling a few contracts during Access trade if it looks like thestorm can’t build beyond the 100 mph sustained wind level thatwould make significant disruptions likely.”
He may have a point. Since moving to ’round the clock tradingjust over two weeks ago, the market has received an injection ofvolatility. In fact, the overnight trading session set the tone forthe market to move higher several days last week as traders usedup-to-the minute weather forecasts to aid in their tradingdecisions. In the same manner, Access trading could present theopportunity for the same traders to continue to liquidate longs oreven initiate fresh shorts when the market reopens Sunday at 7:00p.m.
Tom Saal of Miami-based Pioneer Futures agrees and maintainsthat he will be in the office Sunday afternoon to execute ordersfor his customers. “If you can’t get enough action from your sportsbookie Sunday, call your broker,” he said only half-joking.
Looking ahead, traders agree that the market’s next price cuewill come from both private and governmental weather forecasts forthis winter, which will trickle out over the next month. First tothe market last Thursday was the National Weather Service, whichreleased its 30- and 90-day temperature and precipitation outlooks.The NWS looks for slightly above-normal temperatures in theSouthwest and South Central portions of the country to deviate fromthe normal reading expected across most of the country. Belownormal temperatures are expected during October within a small butpopulous area extending from Lexington, KY across Indiana andIllinois to include St Paul and Minneapolis, MN.
Adding the potential for early heating demand to the fact that”a normal winter” will be much cooler than the last threewarmer-than-normal winters, it may be too early for bulls to turnin their horns.
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