Bears

For the second week in a row, natural gas futures shrugged off an undeniably bearish storage report. After dipping to $6.25 in the moments following the report of a record-setting 114 Bcf weekly storage injection, the July contract rebounded Thursday afternoon amid waves of short covering and speculative buying. The contract notched its highest close ever at $6.521, up 14.6 cents for the session and within striking distance of Wednesday’s $6.61 top.

Natural gas futures dropped lower Thursday morning as bears were rousted for the second week in a row by a larger-than-expected storage injection (57 Bcf). After falling a dime in the five minutes following the storage report, the market stabilized for the rest of the session. June futures closed at $5.267, down 11.8 cents for the day.

With few fresh fundamental factors on which to trade, natural gas futures prices chopped lower Tuesday in agreement with increasingly bearish technical factors. The May contract was hardest hit by the selling, dipping 6.8 cents to close at $5.645. After two days of quiet trading, activity picked up on Tuesday and added credence to the down move. Estimated volume was 67,340.

After breaking to a new 23-month high Tuesday morning in concert with higher cash market prices, natural gas futures sifted lower in the afternoon as traders liquidated long positions when it became apparent that $6.00 was not in the cards. The March contract closed at $5.762, down 0.4 cents for the session and nearly a dozen cents below its $5.88 high. At 84,273, estimated volume was unremarkable considering the market put in a new two-year top.

Despite overbought conditions and forecasts calling for warming temperatures, natural gas futures finished the week on a positive note Friday as traders bid the market higher in sympathy with cash prices that remain at a premium to futures. There also was apprehension of the release of potentially bullish storage data Thursday. However, the gains were a winter-month-only phenomenon, as advances in February and March were in sharp contrast to losses throughout the rest of the contracts.

After oscillating higher, then lower and carving out a quick 13-cent trading range in 20 minutes Thursday morning, January natural gas futures finished the day with a bang as traders priced in another in a string of bullish storage reports (91 Bcf withdrawal). January finished at $4.406, up 10.8 cents for the session and just four ticks below its daily high at $4.41.

Despite a spirited rebound Thursday morning following the Energy Information Administration’s (EIA) report of a larger-than-expected 27 Bcf withdrawal, natural gas futures rotated lower in the afternoon, as traders took into account the latest round of bearish weather forecasts. December futures finished at $3.831, down 2.3 cents for the day and a whopping 18.9 cents off its high for the day. Volume in the pit was moderate to heavy with an estimated 93,031 contracts changing hands.

For the second day in a row, the natural gas futures market opened higher but fell lower late in the session as traders elected to take profits on the hunch that all the bullish news available has already been factored into prices. By virtue of losses Friday, Monday, and Tuesday, the November contract becomes the first prompt month since September to notch a string of three down days. It closed at $4.11, down 4.7 cents for the session and a whopping 31 cents beneath Monday’s 18-month high at $4.42.

Not even a late, short-covering rally could take it away from bears Wednesday. It was their day. In addition to slipping 2 cents to close at $4.227, the November futures contract completed the bearish trifecta by notching both a lower low and lower high for the session. The only thing shaky about the down-move was that it came on light estimated volume of just 61,313 contracts.