Buoyed by cash market buying interest, natural gas futuresshuffled higher Friday as traders covered shorts ahead of theweekend. After opening at $2.755, the November contract climbedbriskly to its $2.82 high shortly after 11 am EDT. Once the initialbuying push subsided, the spot month moved mostly sideways for therest of the session to settle at $2.793, a 4.9-cent gain for theday.

“Short covering, pure and simple,” was one trader’s take onFriday’s price action. “There were a number of shorts who werebetting that cash prices would take the futures market lower[Friday]. When cash opened and began to move higher, they wereforced to cover in a hurry.

“Twice now the cash market has dipped into the $2.20s and bothtimes that level has brought out strong buying interest fromutilities that are looking to cap off their storage reserves,” hecontinued. And with nearly a 50-cent spread separating October cashprices at the Henry Hub and November futures, the economicincentive exists to continue to stuff gas into the ground.

Looking ahead, many sources feel that the October cash tradingwill receive its first real test Monday when the market is gracedwith its full complement of traders. “I’d expect to see thatcash-futures spread come in a little bit, the trader added.

However, Tom Saal of Miami-based Pioneer Futures remainsdoubtful that futures prices will move much lower, at least in theshort run. “The market is still revealing its doubts that supplywill be able to meet demand during peak periods this winter.” Saalmaintains that the proof lies in the very low storage injectionsthis summer that occurred during periods of heavy gas demand forelectric generation. “I’m not saying the storage-rich consumingregion will see a supply shortage [this winter], but the producingarea might,” Saal hypothesized.

By the same token, Susannah Hardesty of Indiana-based EnergyResearch and Trading, Inc. is bullish on forecasts released byOmaha-based Strategic Weather Services (SWS). “SWS is projecting acolder than normal November and December 1999, in all majorconsumption areas of the Midwest and Northeast,” she said.

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