Mentality

There are risks facing the natural gas industry that could upset the current “gold rush” mentality, said speakers Tuesday at the National Association of Regulatory Utility Commissioners (NARUC) summer meeting in Los Angeles. Reserves estimates are but one concern.

April natural gas futures continued to grind higher as traders continued to note an overall bullish mentality to petroleum markets and a general unwillingness to sell. The April contract rose 1.1 cents to $10.011, and May settled 1.4 cents higher at $10.078. April crude oil continued its march higher adding $1.17 to $109.92 after trading as high as $110.20.

You’ve got to like the “I will not be pushed” mentality exhibited by the market Wednesday. Less than 24 hours after Federal Reserve Chairman Alan Greenspan told Congress that the nation has a long-term gas supply problem, natural gas futures turned lower as traders liquidated longs in hopes of taking advantage of short-term bearish rewards.

Taking back gains achieved in Monday’s rally, natural gas futures fell Tuesday amid waves of fund and local selling. The February contract was hit hardest by the selling, dropping 14.4 cents to finish at $5.107. While natural gas remains in an uptrend — both on the intermediate and long-term charts, traders feel that the longer the market remains range-bound, the greater the potential for a significant downdraft when prices finally break lower.

Acting on the mentality that Tropical Storm Barry was innocent until proven guilty (see Daily GPI, Aug. 3), natural gas futures tumbled lower Friday morning as traders re-initiated shorts that they had covered just 24 hours prior. As of noon (EDT), the September contract was 19.7 cents lower at $2.995. The market then proceeded sideways for most of the afternoon as sellers took a breather to monitor the storm. They were not finished however, and after gaining confidence the storm was not going to re-intensify Friday, sellers conspired for one last push lower. At the closing bell, the September contract was 22.1 cents lower at $2.971.

Here today; gone tomorrow was the prevailing mentality in thefutures arena yesterday when the coldest temperatures of the yearwere more than offset by forecasts calling for a warm-up by earlynext week. And as has been the case for most of the month, it wascash prices that not only led the way for the futures market, butalso notched a larger change on the day-where the January contracttrickled down, 2.2 cents to settle at $1.925, cash prices sank by adime on many pipes.

For the second Wednesday in a row, ebbing concerns of tropicalstorms and a “buy the rumor, sell the event” mentality has put themarket under selling pressure. In the wake of Hurricane Earl lastweek the October contract sank 13.4 cents. This Wednesday, themarket was already in the process of giving back some of Tuesday’sgains even before Tropical Depression number 6 became TropicalStorm Frances. That left the October contract down 4.1 cents tosettle at $1.833 yesterday.