For the second session in a row, natural gas futures were lifted from early morning lows Tuesday as bargain buying more than offset short selling. But just like Friday, the session-long rally yesterday was not enough to recoup losses sustained on the open, leaving the market with yet another in a string of down-days. The October contract closed at $2.359, off 2.1 cents for the session, but more than a dime above its $2.255 low.

Many traders polled by NGI elected to play it safe Tuesday, citing a Tropical Storm in the Atlantic as well as extremely “oversold” conditions.

According to the National Hurricane Center in Miami, the poorly organized Tropical Storm Erin packing maximum sustained winds of 50 MPH was expected to pass “well north” of the Leeward Islands. On this course the storm will likely pose more of a threat to the Southeast U.S., than it will to natural gas production assets in the Gulf of Mexico.

However, the weak tropical storm threat was not the only factor influencing prices yesterday. Also of interest for traders Tuesday was today’s release of fresh storage figures. Expectations ahead of that report range in the 77-100 Bcf range, which if realized would easily eclipse the year-ago tally of 42 Bcf as well as the five-year average refill of 69 Bcf.

Looking past the AGA report, traders are attentive for technical signs that the market is bottoming. In addition to the heavily oversold conditions that exist in the short-term, traders note that the non-commercial segment of the market is reaching an all-time record net-short position. According to the latest Commitments of Traders Report released Friday by the Commodity Futures Trading Commission, non-commercial traders held net-short positions totaling 34,343 through last Tuesday. While these speculative traders still only represent a scant 4.5% of total open interest, their trading activities are scrutinized by market watchers because of their uncanny ability for selling into a falling market and buying into a rally. For instance, during the last 8-9 months of declining prices, non-commercial traders have reversed from a 14,000 net long position to a net short position of more than 34,000.

And when was the last time they were this short? The answer may be a little chilling for bulls with a good memory: Late August of 1998 when prompt month futures prices carved out a $1.61 low before reversing direction and checking higher throughout the fourth quarter of that year.

For a full listing of CFTC data, please visit https://intelligencepress.com/data/cot/history_table.html

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