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Speculators Make Quick Work of Thursday’s ‘Retracement’
Feeding off bullish weather forecasts, the natural gas futuresmarket snapped back yesterday as local and fund traders added totheir growing long positions. That enabled the November contract toerase Thursday’s 13.6-cent downward retracement and retest the$3.00 level in active, pre-weekend dealings. The prompt monthfinished strongly and closed at $2.975, a 14.1-cent advance on theday.
A California trader who saw his PG&E Citygate deals peak inthe mid-$3.20s believes November futures might be there before toolong. “The move lower [Thursday] was normal. It is almostimpossible for a market to move straight up without some sort ofshort-term correction. Locals and [speculative trading funds] werebehind this rally [Friday] and I see no reason why they will notcontinue to take it higher [this] week,” he said.
For Susannah Hardesty of Indiana-based Energy Research andTrading, last week’s price action followed her previous forecastnicely, hitting the first peak of the fall high on the move to$3.03. “This will be the lowest of the three peaks to the fallhigh, and the identification of that peak is most important becauseit helps close in on the timing of the remaining two highs,”Hardesty said. She continued by noting that there will beadditional short term highs for profit-taking if you missed thatone, but volatility in this market will continue to be high withprices moving in wide swings, through mid to late December. Inaddition to the technical systems that she monitors, Hardesty’sprice prediction is consistent with forecasts calling forbelow-normal temperatures for the Midwest and Northeast for therest of this month.
Jim Rouiller, chief meteorologist with Omaha-based StrategicWeather Services corroborates that forecast and looks for it tocool down in a hurry for gas consuming regions in parts of theMidwest and East. Based on a blend of European and American mediumrange weather models, Rouiller predicts heating degree days (HDD)this week will approach 200% of normal for the Great Lakes, whileChicago and Cincinnati will see HDD nearing 175% of normal. TheNortheast will follow suit, where below-normal temperatures willramp up HDD to 125% of normal. However, he does expect thosetemperatures to moderate back toward normal by the first ofNovember, which could make for an interesting contract expirationand bidweek. The November contract goes off the board Wednesday,Oct. 27.
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