It has been a long time since bullish traders have had much tosmile about in the natural gas market. Both fundamentals andtechnicals have exerted their influence on the market for most ofthe summer, and, in doing so, have forced natural gas prices todepths not witnessed since 1995. However, Monday morning traderswere greeted with two potentially bullish developments — onetechnical in nature and the other fundamental — that prompted ashort-covering rally enabling the market to eat away at some oflast week’s price loses. The October contract led the way,advancing 8.8 cents to settle at $1.752 yesterday.

Although hurricane Danielle appears to be making a turn awayfrom the shores of the U.S., a yet to be named tropical disturbancelurking in the Gulf of Mexico (see cash market story) had sometraders scrambling to cover positions, while others stepped in tobuy fresh long positions, sources said.

A New York broker felt the timing of this storm could not havebeen better for a spike in prices. “This market is particularlysusceptible to short-covering as evidenced by the large shortposition hanging around out there,” he said referring to theCommodity Futures Trading Commission (CFTC) Commitment of Traders(COT) report. Released too late to affect trading last Friday, thebi-weekly COT report (see Daily GPI Aug. 31, 1998) showed thenon-commercial segment of the market was once again building up alarge, net-short position of over 34,000 in open interest.

However, a Houston basis trader was unimpressed with Monday’sprice action, and favors a continuation of the general downwardmomentum. “The trend is still your friend,” he quipped. Anothertrader said the unwillingness of the cash market to trackone-for-one with the futures market advances proved that priceswill snap back into line as soon as the “hurricane hype” is over.

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