Bears

The outlook for the natural gas and power industry bears a strong resemblance to the markets in the early 1990s, according to a report issued by Credit Suisse First Boston Equity Research last week. The key difference is the current valuation for the Standard & Poor’s 500 Index is 10% higher than it was in 1992, while the valuation for the natural gas and power sector is 30% lower, it said.

Given the uncanny similarity to events of a decade ago, the outlook for the natural gas and power industry bears a strong resemblance to the markets in the early 1990s, according to a new report issued by Credit Suisse First Boston Equity Research Tuesday. The key difference is the current valuation for the S&P 500 Index is 10% higher than it was in 1992, while the valuation for the natural gas and power sector is 30% lower, it said.

It was a popular belief heading into last weekend that the only thing that could subvert a gap-higher open in the natural gas pit on Monday was a substantial revision in the short- and intermediate-term weather forecasts. The potential last week of Old Man Winter making one last appearance across much of the Plains, Midwest and Northeast was too scintillating for traders not to buy into it — even though the cold weather was still a week or more away.

Following the release of some of the most price-constructive medium range weather forecasts thus far this winter, natural gas futures shuffled higher Thursday. Continued short-covering pressure was enough to promote prices to new six-week highs for the third day in a row. However, the buying was done in an orderly manner, and because it was almost evenly matched by local and commercial selling, the day’s gains were limited. The March contract settled at $2.425, up 4 cents for the session. By virtue of yesterday’s 118,144 figure, estimated volume has easily eclipsed the 100,000 mark each day this week.

In a typical display of its ability to shrug off undeniably bullish information, natural gas futures turned lower Wednesday afternoon following the announcement that a whopping 156 Bcf was pulled from underground storage facilities last week. After surpassing its Jan. 17 high of $2.38 to reach a new 5-week high at $2.41, the March contract plummeted 16.5 cents in 25 minutes to finish at $2.245, down 6 cents for the session.

Bulls and bears eyeballed each other across the gas futures pit Monday, but in the end neither group really flinched. The March contract ended the day down a couple pennies with a lower low and a slightly lower high compared to Friday. March closed the day at $2.117, down 2.1 cents. Without a substantial change in market fundamentals, a standoff appears likely.

Natural gas futures dipped then rallied Wednesday afternoon, as bulls and bears were caught in a tug-of-war on the news that 111 Bcf was pulled from underground storage facilities last week. With that, March completed its debut as prompt month at $2.08, up 1.3 cents for the session and 5 cents off its $2.03 low notched just 20 minutes prior at 2:10 p.m. EST. Estimated volume was average at 80,499.

Besieged by a deteriorating fundamental picture in a market that is already firmly entrenched in a downtrend, natural gas futures traders pressured prices to new lows yesterday, amid a seemingly relentless barrage of selling activity. Even the season’s first triple-digit storage withdrawal (124 Bcf) failed to induce much of any buying sympathy, giving traders little choice but to continue to short the market. The February contract closed 19.7 cents lower at $2.268 and in doing so broke its previous all-time low at $2.415 notched back in February 1999.

There appeared to be just enough cold weather to keep the bears at bay for at least one more day in the East Wednesday, as regional prices ranged from flat to a little more than a nickel higher. Most western points continued to soften, however, led by drops of about a dime in California.