For ninth time in the last 10 trading sessions, natural gasfutures were lower last Friday as sellers pressured theprompt-April contract to its life-of-contract low. No freshfundamental news was seen to lift the market, and as a result itfollowed the long-standing trend 3.1 cents lower to $1.628.

A New York broker saw long liquidation as the major factor inFriday’s declines. “There were some weak longs betting on a rallyfollowing the storage report Wednesday. But the market didn’tcooperate and they were last seen heading for the exits [Friday].”

But Tom Saal of Miami-based Pioneer Futures attributed therecent accelerated decline to additional short-selling byspeculators and small traders rather than long liquidation by themarket as a whole. The latest Commitment of Traders report releasedFriday defends his assertion. For the week ending Tuesday, Feb. 23,the Commodity Futures Trading Commission reported thatnon-commercials (speculators) and small traders had increased theirshorts by a combined 16,895. But of those two groups, Saal feel themost insight can be learned by looking at the small traders, whichhe feels is mostly represented by small commercials. “Small traderssold-short twice as many positions as the speculators, which makesthem susceptible to an unexpected bounce. And if the market is ableto move higher, how strong will their resolve be? Since they arethe freshest shorts, they could have the least tolerance to a pricerally,” Saal mused.

“And if the market is to continue lower, who are the new sellersgoing to be? Speculators are already net short more than 30,000, sowill it be commercials who will sell at $1.60?” Saal thinks not andbelieves that the absence of continued selling will allow themarket to move higher.

However, he admits that storage is still the wild card in themarket. “The market will continue withdrawals for the next fourweeks. The more gas that is pulled, the worse it is for prices now,but large drawdowns now could improve the price scenario thissummer in the form of incremental seasonal storage demand.”

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