Following Thursday’s remarkable 27-cent spike, natural gasprices eased Friday at the New York Mercantile Exchange as tradersrolled out of near-month October contracts in favor of wintermonths. While the October contract finished down 6.7 cents, theloss was much less severe for November, which closed down 1.5cents. December and January 2000 contracts resisted the downturnaltogether, notching gains of 4 cents and 2.2 cents respectively.

Many traders contacted by NGI were not surprised by the market’sability to reverse directions following Thursday’s rally. “What wesaw [Friday] was just some profit-taking ahead of the weekend,” aGulf trader explained.

But according to Susannah Hardesty of Indiana-based EnergyResearch and Trading, the second (and final) bottom of the summerlow was hit last Wednesday and prices will now continue higher tothe first summer high early next month. Hardesty, whose tradingtheory is centered on a series of fall and spring highsinterspersed with summer and winter lows, believes now that themarket has accepted the fact storage will be nearly full by the endof the injection cycle, it can focus on two bullish factors-winterweather and deliverability. “EIA is calling 1999 production downand consumption up. This could lead to price spikes during periodsof peak heating demand,” she wrote in Natural Gas Weekly Reportdated Sept. 23, 1999.

While Hardesty switched to a bullish stance last week, ThompsonGlobal Markets of New York remains unflinchingly bearish onfundamental grounds. The group cites high storage levels, lack oftropical activity and unfavorable spark spreads as limiting factorsfor natural gas demand. “Because of the poor fundamental basis fromthis rally, we view it as fragile, and a break under [Thursday’s]$2.87 low (November) could trigger a run at the $2.74-77 price gapleft [on the] opening. Support demonstrated by the recent lows at$2.655 and the $2.60 low from Sept. 2 is still likely to break downbefore this contract goes off the board in our view.

Of more immediate concern for traders is the expiration of theOctober contract, which goes off the board Tuesday. Some marketwatchers believe prices may continue lower as traders continue toroll their positions into outer months.

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