Rally

Despite the gas futures rally that pushed May prices to contracthighs of $3.087 last Thursday, Susannah Hardesty, president ofEnergy Research and Trading, still expects a higher spike nextmonth, possibly to $3.30 for the near-month contract, asnervousness over strong summer gas and power demand reaches thetrauma stage.

After a tumultuous morning rally and retreat, natural gas pickedits way higher yesterday as traders looked past a mixed technicalpicture to focus instead on the possible reemergence of seasonaltemperatures by week’s end. The April contract advanced 2.5 centsto $2.85. However, the real stories were in the out months, whichgalloped higher to post gains of 3.4 cents and 3.5 cents for thesummer and 12-month strips respectively.

Cash prices kept rising Wednesday but at a considerably slowerrate than on Monday and Tuesday. Most of the new increases werearound a nickel or less, and the Northern California points ofMalin and the PG&E citygate actually fell slightly afterPG&E elected not to extend a low-linepack OFO. Sourcesindicated some retreat is likely today, saying the cash market hadmilked just about all the upside possible out of recent forecastsfor colder weather. In addition, the screen’s decline of nearly adime Wednesday should be a negative influence, they said.

Following a three-day, 30-cent price rally, the natural gasmarket cooled its heels yesterday as traders took profits amidtechnically oversold conditions and ahead of fresh storage data.That sell-off sent the January contract tumbling 9.9 cents lowerthroughout the session yesterday. By virtue of trading above, thenbelow Tuesday’s range it completed an outside-down day on the dailycharts to settle at $2.486.

Fresh off a two-day, 24-cent price drop, natural gas futurestraded unchanged for most of the session Tuesday with light buyingand selling by trade accounts matching up nearly perfectly. Bymid-afternoon, however, it looked as if bears would make it atrifecta, as they successfully etched new lows for the Januarycontract down to $2.21. But after remaining on the sidelines formost of the day, speculators were seen as aggressive buyers intothe final bell. That enabled the January contract to finish on apositive note, up 4.7-cents to $2.271.

The November natural gas futures contract closed down 3.1 centsyesterday at $2.824 after trimming gains notched earlier in thesession. After a spirited sell-off in Tuesday’s Access trading, thenewly crowned prompt month erupted higher Wednesday to print a$2.94 high as buyers picked up contracts which they hope willrepresent bargains heading into the winter heating season. Byafternoon, however, the market banter had turned once again tobearish storage predictions and that pressured the market lower inlight trade.

Taking a cue from Thursday’s Access trade sell-off, the futuresmarket continued lower Friday as traders fully discounted thecurrent trio of storms by aggressively exiting their longpositions. By 2:40 p.m., the September contract had fallen justshort of filling in the chart gap down to $2.805. However, $2.83was all that the sellers could muster and prices rallied in thelast 30 minutes of trading. The September contract settled at$2.912, down 3.6 cents for the day but up more than 8 cents fromits earlier low.

Most cash points rose 1 to 5 cents yesterday on the strength ofa futures rally fired by a bullish American Gas Association storagereport. Traders were in agreement that prices were flat toWednesday until the futures screen picked up in the late morning.

After a choppy week of range-bound trading, bulls foundthemselves in the driver’s seat Friday at the New York MercantileExchange when weather forecasts and technical factors came intoagreement. Given the opportunity it didn’t take long forspeculators, comprised mostly of local traders, to become buyers inan attempt to push the August contract through resistance tobuy-stop orders that they knew were waiting in the $2.21-22 area.However, what they failed to realize was that there wasconsiderable commercial selling waiting there as well, it proved tobe more than enough to satiate the buying demand. The Augustcontract notched a $2.225 high shortly after 1 p.m. (EST) only tocome crashing back to settle at $2.187, an 0.8-cent advance for thesession.