Fueled by a record-setting storage withdrawal released yesterdayand revised outlooks by both private and governmental weatherforecasters, natural gas futures rocketed higher yesterday toeasily notch new all-time highs.
After tumbling lower in a technical sell-off Wednesdayafternoon, the market was a bull’s dream Thursday, erupting morethan a half-dollar in active trading. Modest profit taking was seenat the close to bring the market off its $6.73 high. But still thegains were impressive, with the January contract leading theadvance, up 40.8 cents at $6.589.
According to the American Gas Association, 146 Bcf was pulledfrom underground storage facilities last week, decreasing totalworking levels to 2,502 or 76% full. Not only was the withdrawalbullish compared with the 5 Bcf net injection seen during the sameperiod last year, but it also eclipsed the range of marketexpectations centered on a 90-125 Bcf draw down. According to theAGA, the five-year withdrawal for last week is 44 Bcf.
However, no sooner had traders digested fresh storage data thenthey were presented with another parcel of fundamental bullishness.According to prominent industry weather forecaster Jon Davis ofSalomon Smith Barney, a series of three Arctic blasts are expectedto descend into the eastern U.S. between now and the middle ofDecember, bringing temperatures back below normal. The NationalWeather Service concurred in its latest six- to 10-day forecast,which calls for below-normal temperatures in the northeast cornerof the country through at least Dec. 10.
And while fundamental factors set the stage for the marketadvance Thursday, technical factors did little to dissuade thebuying interest. After watching prices bounce off stubbornresistance at $6.50 Wednesday, bulls were relieved when the Januarycontract gapped above that level to open at $6.56 yesterday. Thatpaved the way for a retest of the prior life-of-commodity high at$6.68.
While intermediate-term traders should expect a test ofpsychological resistance at $7.00, there exists the possibility fora sell-off Friday, warns Nymex local Ira Hochman. “When the marketdevelops back and forth early and then rallies, it has a goodchance to fail.. Beware if the market fails up here and tradesbelow $6.57.”
Peter Hattersley of New York-based Rafferty Group is a littlemore bullish and lowers his pivot area down to the aforementionedresistance (now support) level at $6.50. “I would be long up herefor a possible test of $7.00. Only a move below $6.50 would make melook to head for the exits,” he said.
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