Enthusiasm

Natural gas futures traders continued to probe the downside on Wednesday but had significantly reined in the bearish enthusiasm that was prevalent on Tuesday. January futures reached a low of $4.193 before closing the regular session at $4.222, down 3.3 cents from Tuesday’s regular session close.

Energy industry insiders appear to be more optimistic this year, but they expect 2010 natural gas prices to average about 10% below Wall Street expectations, according to the results of an informal survey by analysts with Raymond James & Associates Inc.

Natural gas futures eased slightly in Tuesday’s trading as market bulls were unable to sustain their buying enthusiasm and traders noted an abrupt intraday tumble. Trade and commercial accounts may now be willing to lock in favorable prices. April natural gas futures fell 2.4 cents to $10 and May dropped 1.1 cents to $10.064. Crude oil continued to rampage higher, trading as high as $109.05 before settling at $108.75, a record.

Upstream investment worldwide hit a world-class pace in 2006, but the return on reserves volumes was paltry. This year, investor enthusiasm has declined, but capital expenditures (capex) by exploration and production (E&P) companies — at least in the United States — show signs of support for organic growth in production volumes, two groups of energy analysts said in their reviews of the sector.

Despite a general decline in investor enthusiasm, capital expenditures (capex) by exploration and production (E&P) companies should support organic growth in production volumes despite the near-term bearish natural gas prices, energy analysts said in a review of the sector.

Natural gas prices reflect a degree of enthusiasm that is typical for this time of year, particularly if there are hurricanes lurking in the Gulf of Mexico, but according to one market observer, once traders weigh healthy storage inventories against expected winter weather, an option strategy designed to take advantage of high levels of volatility may be the trade to make.

The futures market gave back a portion of recent gains on Fridayas traders covered fresh long positions ahead of the weekend. TheOctober contract was dealt the largest losses, slipping 8 cents tosettle at $1.878. November, which has been tracking nearly pennyfor penny with October was somewhat immune to the decline, losingonly 4.6 cents to $2.161.

If bullish natural gas futures traders became excited when theMay contract moved above the $2.70 mark yesterday morning, theirenthusiasm was tempered following the spot month’s daily close of$2.689. Although this represents a daily gain of 2.1 cents, onetrader is concerned that futures prices will be falling in the daysto come. “I was hoping a break above $2.70 would lead to a move to$2.80, but traders seemed pretty quick to slam the door. It lookslike profit taking has started ahead of the long holiday weekend,”he said. The New York Mercantile Exchange will be closed for GoodFriday.