Rebound

Rebounding from Thursday’s price free-fall, natural gas futures turned higher Friday as traders bought back their shorts on the idea that governmental weather forecasts calling for mild temperatures through the remainder of the winter may be inaccurate.

More than one trader got fooled trying to predict Thursday’s market. Sources had been near consensus Wednesday in expecting that day’s price slide to continue. Instead, cash quotes managed a fairly strong rally, rising between about a dime and a quarter nearly across the board. Only a nickel loss at the Algonquin citygate ran against the overall market grain.

After tumbling through the first 90 minutes of trading, natural gas futures battled back Wednesday afternoon as locals traders had their way with the market for the second session in a row. With only 91,061 contracts changing hands, volume was relatively light considering the yo-yoing price action. In its first back-to-back daily advance since mid-October, the December contract closed at $3.877, up 0.5 cents for the session.

Despite a spirited rebound Thursday morning following the Energy Information Administration’s (EIA) report of a larger-than-expected 27 Bcf withdrawal, natural gas futures rotated lower in the afternoon, as traders took into account the latest round of bearish weather forecasts. December futures finished at $3.831, down 2.3 cents for the day and a whopping 18.9 cents off its high for the day. Volume in the pit was moderate to heavy with an estimated 93,031 contracts changing hands.

After watching prices bubble higher during the overnight Access trading session, natural gas bulls were treated to a gap higher opening Tuesday morning, as concerns over storm curtailments lingered. However, once the follow-through buying had run its course and resistance in the $3.88-90 area had held, prices shuffled lower in the afternoon. The November contract finished at $3.862, up 12.2 cents on the day, but down 2.8 cents from its high for the session.

After finishing last week on very negative and tenuous footing, natural gas futures extended lower Monday as funds and local traders exerted their influence on a market mostly devoid of commercial players. However, after plumbing a new, four-week low at $3.67 yesterday morning, the November contract struggled back to near unchanged in the afternoon. It settled at $3.74, up 0.1 cents on the day.

After dipping to new three-day lows early in the session, natural gas futures roared back to life yesterday as traders hedged for the possibility that Hurricane Lili could knock out a portion of Gulf Coast production for more than just a few days. After covering a wide, 24.5-cent trading swath, the November contract closed at $4.16 yesterday, up 9.3 cents for the session and just 4 pennies off its high on the day. At 102,851, estimated volume was light, considering the expanded trading range.

After pressuring prices lower ahead of the weekend, natural gas futures traders bid the market back up Monday in reaction to forecasts calling for Isidore to re-strengthen as it moves off the Yucatan Peninsula into the warm waters of the Bay of Campeche. Buying was seen in two distinct surges. Prices bubbled steadily higher throughout the morning and then spiked at the closing bell. The October contract finished at $3.978, 22 cents higher for the day and just off its new 15-month top at $3.99. The November contract, which will become the prompt contract after October goes off the board Thursday at 2:30 p.m. EDT, finished 18.3 cents stronger at $4.175.

“If economic activity does not rebound and we have a warm winter, perhaps a price spike can be averted one more year, thanks to the storage overhang,” Peoples Energy Chairman Thomas Patrick predicted, but the overall trend is toward greater demand and declining supply.