The two-day stampede, in which April natural gas futures rose more than 40 cents, came to an end Friday as trade and commercial accounts were reluctant to carry long positions over the weekend and sold into local and short-term trader buying. The April contract fell 5.1 cents to $7.269, and the May contract retreated 2.9 cents to $7.406. Friday’s softness, however, did little to reclaim last week’s gains with April posting a 34.5-cent advance for the week.
By comparison, the May crude oil futures contract continued higher Friday, rising 59 cents to $62.28. Traders suspect that next week the gains in crude oil may be trimmed.
“We saw trade and commercial selling every half-cent as April futures rose to their high of $7.35,” said a New York floor trader. He added that April finished trading at the bottom end of the closing range, “but that is where the trade and commercial accounts were playing it from.”
“It looked like the trade sees some value at these higher prices and took advantage of them. The 100-day moving average comes in at $7.374, and I think that will work as decent resistance. We’ll see next week if the scale-in selling continues,” he said.
Others also suspect selling early next week. “I think the ability of the natural gas market to hold the week’s gains is due in large part to the strength in the crude oil futures and the support from the wet (barrel) markets. The week’s gains reflect seasonal pattern buying ahead of the summer months. On Monday there may be some profit-taking in both natural gas and oil markets,” said Eric Wittenauer, energy analyst with AG Edwards, St. Louis.
Wittenauer added it was not uncommon for natural gas prices to make lows in the late-winter period, and the $6.820 low posted by the April contract Monday was likely the low price for the balance of the year.
Longer term, traders see the market eventually advancing. “While we remain skeptical of the ability of this market to sustain rallies above the $7.37 area, we are also maintaining an opinion that future price declines back to below the $7.00 mark will provide longer term buying opportunities,” said Jim Ritterbusch of Ritterbusch and Associates. He pointed out that any kind of weather-related demand will prove limited for a couple of months, but “we are of an opinion that lows may have been placed late last week at about the $6.81 area, and that any fresh significant news is more likely to fall toward the bullish side.”
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