Bears

In another delayed reaction to bearish storage data, the natural gas futures market funneled lower for the second straight Friday. However, in contrast to the sustained selling push exhibited on Oct. 17, the market dropped lower all at once Friday, as local traders triggered sell-stop-loss orders.

Natural gas prices slipped lower for the third-straight session Wednesday as traders continued to lighten their longs ahead of the release of weekly inventory data Thursday. Similar to the early weakness exhibited on Monday and Tuesday, the market experienced its heaviest selling in the morning Wednesday, forcing bulls to battle back in the afternoon from a deep deficit.

After spending most of the session near Monday’s $4.94 high, the November natural gas futures contract sold off late in the session Tuesday as weak longs took profits ahead of the Thursday release of potentially bearish storage data.

After suffering though a week’s worth of daily advances, bears finally got their chance Monday as extremely mild weather forecasts turned last week’s buyers of natural gas futures into sellers. When a quick uptick at the opening bell failed to surpass Friday’s $5.295 high, sell orders flooded into the trading pit. It took just an hour for the September contract to drop 25 cents Monday morning, nullifying about two-thirds of last week’s advance. It closed for the session at $5.083, down 19.7 cents on the day.

Similar to the price action in Friday’s abbreviated trading session, natural gas futures failed to hold onto morning advances Monday and ultimately closed in the lower half of the contract’s daily trading range. The only real difference between the two sessions was the net change for the day, with Monday’s modest, 3.5-cent advance and $4.883 settle contrasting Friday’s 4.3-cent decline. Volume was weak again Monday with an estimated 40,049 contracts changing hands.

Though a casual look at the 4.7-cent increase and $4.677 close in September futures might suggest the trading action was price-supportive Tuesday, that analysis fails to take into account the myriad of factors that paint a decidedly bearish picture of the trading session. Not only did the natural gas futures market fail to keep pace with crude oil prices Tuesday, but it also lacked any substantial buying boost after probing down to key support at $4.60 on Monday. At 51,457, estimated volume was also weak, evidence that the market is without a clear consensus.

Following Tuesday’s 24-cent price decline, natural gas futures prices held Wednesday as traders assessed enough dribs and drabs of bullish news to prevent a test of last December’s market low at $4.69. After clawing back from an early push down to the $4.80 low, the August contract inched back to carve out a minuscule, 0.8-cent advance to $4.876. At 72,206, estimated volume was moderate for the session.

Despite the development of Tropical Storm Bill in the Gulf of Mexico over the weekend, natural gas futures turned only modestly higher Monday as bulls appear to be still reeling from last week’s very steep price downdraft. The August contract closed at $5.411, up 4.9 cents for the session and in the middle of the contract’s 13-cent trading range Monday. At 45,356, extremely light estimated volume was evidence of the lack of consensus surrounding the day’s trading activity.

Despite a third straight triple-digit weekly storage injection (114 Bcf), natural gas futures surged Thursday in three distinct waves of short-covering and speculative buying. When the dust had settled and the orders counted at Nymex, the numbers were impressive: July natural gas futures rose 36 cents to close at $5.941, just off its new one-week high of $5.95. In contrast to the first three trading days of this week, volume at Nymex was heavy Thursday, with an estimated 92,607 contracts changing hands.