Reaction

After dropping a dime in a knee-jerk reaction to slightly bearish storage data (42 Bcf injection) released at 10:30 a.m. EDT, natural gas futures chopped sideways for the rest of the session Thursday as traders groped for fair value in a market that has witnessed a 58-cent trading range since Oct. 1. As it turned out, nothing was settled, with about half the traders, brokers and analysts surveyed by NGI yesterday expecting higher prices Friday and half looking for more weakness. The November contract closed at $3.828, down 9 cents for the session and just above support at $3.795.

After holding support following a knee-jerk downward reaction to the latest industry supply data, natural gas futures vaulted higher in two distinct buying surges. The first rally consisted of a move back above $3.30 that came on the heels of the 10:30 a.m EDT storage report. After a brief siesta, bulls were running Thursday afternoon, lifting prices convincingly higher into the close. October finished at $3.342, up 14.9 cents for the day and 24.2 cents above its early-session low.

In sympathy with lower crude oil prices and in reaction to the virtual certainty that neither Tropical Storm Dolly nor Edouard will pose a threat to production, natural gas futures continued their week-long descent Tuesday as locals and commercial traders liquidated long positions. With a gap-lower open on the daily chart, bears set the tone right from the outset. However, by 11 a.m. EDT, the selling pressure had dried up, leaving the market to chop sideways throughout the rest of the session. October finished at $3.132, up 3.2 cents from its morning low, but down 16.4 cents for the day.

In a stunningly well-mannered reaction, considering what the market sometimes does after receiving fresh fundamental news, natural gas futures dipped slightly lower Thursday morning as traders learned that a larger-than-expected 68 Bcf was added to underground storage facilities last week. By 11:20 a.m. EDT the June contract had carved out its low for the session, leaving the prompt month to shuffle sideways within an extremely tight 5-cent range for the rest of the day. June settled at $3.438, down 2.1 cents from Wednesday’s close.

In reaction to requests from both the commercial and large speculative trading fund communities, Nymex is ready to launch — possibly as soon as Friday — large order execution (LOX) trading for natural gas, which attempts to match buyers and sellers willing to trade lots of between 250 and 5,000 contracts. Similar to the current open-outcry trading for smaller lots, LOX trading will be conducted in the pit and will be supported by a LOX bookkeeper who will announce quotes, match buyers with sellers and facilitate the order execution.

In reaction to the downfall of Enron Corp. that eventually led to its buyout by Dynegy Corp., Duke Energy executives took an hour last week to reassure the investment community about its portfolio and risk management system, and also talked about the future of energy trading, whether or not a merger takes place. But what top management was attempting to do most was put most succinctly by CFO Mary Gilbert, when she firmly explained that they will hear “no surprises from Duke Energy.”

In reaction to the downfall of Enron Corp. that eventually led to its buyout by Dynegy Corp., Duke Energy executives took an hour on Monday to reassure the investment community about its portfolio and risk management system, and also talked about the future of energy trading, whether or not a merger takes place. But what top management was attempting to do most was put most succinctly by CFO Mary Gilbert, when she firmly explained that they will hear “no surprises from Duke Energy.”

In reaction to moderating weather forecasts for this week and amid some very negative technical factors, natural gas futures tumbled lower Friday, as traders liquidated positions ahead of the weekend. The November contract was the hardest hit by the selling pressure, slipping 18.7 cents to close at $2.227. The winter strip was not far behind, giving back 14.5 cents to finish at $2.657.

Buoyed by follow-through buying on the heels of Wednesday’s late price surge and in reaction to weather forecasts (both for hot temps next week as well as the formation of Tropical Depression 2), natural gas futures shuffled higher for the third session in a row Thursday as short-covering promoted prices to new week-and-a-half highs. At the closing bell, the August contract was knocking on the door of some important technical levels, up 8.6 cents at $3.428.