Bearish

Cash traders apparently decided to ignore a relatively bearishstorage report, a retreat in Wednesday afternoon’s Access futurestrading and a further small downtick on the screen Thursday.Instead they focused on Wednesday’s jump of almost 20 cents inregular futures business and tried to match it in cash businessThursday-coming close in the cases of Agua Dulce and NGPL-SouthTexas, which both rose about 14 cents. Other points moved up in thevicinity of a dime. Standout exceptions were Malin andintra-Alberta, which managed increases of only a nickel or so. Themildness of the Malin uptick occurred even though PG&E failedto extend Thursday’s OFO.

Thursdays have been a bearish trader’s best friend lately withthree of the last four featuring follow-through selling on theheels of some hefty storage refill estimates. However, yesterdaydid not follow true to form, as traders digested alarger-than-expected 92 Bcf American Gas Association storage refillestimate then managed to push July up 2.5 cents to settle at$2.071. In doing so, several traders remarked, July exhibitedJune-like characteristics marked by narrow trading ranges amidrelatively low volume. June looked to expire without much fussearlier in the week, then the bottom dropped out on the last day.It “looks as if that was more a case of people liquidatingpositions then anything,” a trader reasoned.

The dam supporting natural gas futures prices finally burstThursday. After successfully fighting back numerous attempts tofall below major support at $2.11 the last several weeks, the JuneNymex contract succumbed to major selling by funds yesterday, andsettled the day down 10.2 cents to $2.067. Volume was extremelyheavy, with an estimated 93,072 contracts changing hands.

The Energy Information Administration continues to be bearish ongas wellhead prices this year but expects prices to remain abovethe $2/Mcf mark because of the possibility that temperatures willbe higher than normal this summer and coal delivery problems maypersist in Texas. In its May Short Term Energy Outlook, the EIAsaid it expects wellhead prices to average $2.15/Mcf this year,down 3.6% from the $2.23/Mcf average in 1997.

Natural gas futures traders received a taste of both bearish andbullish news Monday, as the spot June contract turned in yetanother in a recent wave of volatile daily trading ranges. Thebears made their presence felt first after June easily fell belowthe double bottom trading formation in the $2.152-16 area toestablish a new low of $2.110. However, strong buying kicked in atthat point, and the June contract rode that momentum to settle theday up 5.5 cents at $2.257/MMBtu.

The April Nymex contract went off the board in bearish fashionon Friday as the spot month fell 3.8 cents to conclude its tradingat $2.300. A broker noted this was as “boring” a settlement day ashe could remember, probably because low volatility last week gavetraders ample opportunities to get out of their positions beforeFriday, he said.