Building on gains achieved in the Tuesday night Access tradingsession, natural gas futures plodded higher yesterday morningbefore spiking dramatically just minutes after fresh storage newswas released. The December contract rocketed to a high of $4.75 andultimately settled at $4.686, a 19.6-cent gain for the session.Estimated volume of 85,529 was evidence of the frenzied buyingactivity.
According to the American Gas Association, 70 Bcf was added tounderground storage facilities last week, bringing total workinggas to 2,712 or 82% full. Compared with a 4 Bcf injection lastyear, a five-year average refill of 30 Bcf, and market expectationscentered on a 60-70 Bcf build, the 70 Bcf refill seen yesterdayappeared to be a bearish indicator. However, the report ushered ina wave of short-covering by traders who rode prices lower over thepast three weeks.
In addition, few sellers held positions above the prevailingprice level at the time the storage report was released, accordingto one observer. Since March 1 when the AGA began releasing itsreport during the regular open outcry session at 2 p.m. (EST), themarket has seen some wild price moves. Brokers have observed thattraders, in an effort to avoid having their limit orders blownthrough on the way up or down, typically pull their orders off themarket ahead of the storage release. What that creates, says GeorgeLeide of New York-based Rafferty Energy Group, is a virtual tradingvacuum both above and below the market. “A move in either directionwill likely run for 15 cents and there is no such thing as aneutral report.”
However, the short-covering that followed the release of freshstorage data may have less to do with storage than some peoplethink. Talk was circulating yesterday that several private weatherforecasters revised their latest six- to 10-day forecasts, callingfor a swath of Arctic air to permeate the upper Midwest and centralPlains by late next week.
In a special midweek update to her weekly subscribers Wednesday,Susannah Hardesty of Indiana-based Energy Research and Tradingreiterated her recommendation that traders should buy their winterrequirements now in an effort to avoid paying higher prices later.”Already [Wednesday] morning, prices have recovered, with Decemberfutures now up 13 cents at $4.62. At this level, all intra daystochastics will reverse back to buy signals, showing that momentumhas reversed to the upside. If December settles [Wednesday] at$4.64, or higher, (which it did) the one-half day moving averagewill also roll into a buy, the first confirmation that the trendhas reversed to the upside once more.”
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