Shorts

Natural gas futures vaulted higher Friday in heavy activity as traders covered shorts ahead of the first blast of cold weather expected across most of the country this week. After easily piercing psychological resistance at $4.00, the November contract paused near the $4.10 mark as traders caught their breath. However, it turned out to be only a quick break and prices rallied into the closing bell. November finished at $4.146, up 31.8 cents for the session and within striking distance of the recent top at $4.25.

Despite a late selloff in the nearby crude oil pit, natural gas futures held yesterday as traders continued to cover shorts amid modestly constructive technicals and bullish expectations ahead of today’s storage report. With that the March contract made it five in a row Tuesday, as it posted a 1.9-cent gain to close at $2.305. By contrast, March crude gave back half of Monday’s $1.15 advance to finish at $20.73 a barrel.

Some traders were surprised by the market’s inability to add to Wednesday’s losses Thursday after breaking below key support at $2.50 on another bearish storage report. According to the AGA, 19 Bcf was withdrawn from the Consuming Region West and 3 Bcf was injected in the Producing Region, resulting in a net 16 Bcf withdrawal for the nation for the week ending Nov. 30 (There was no change in the Consuming Region East). The net withdrawal was well within the range of expectations, which were centered on a draw-down of 10-20 Bcf. However the net takeaway was undeniably bearish as it fell short of comparisons with last year (73 Bcf withdrawal) and the five-year average (55 Bcf withdrawal). Storage is now 30%, or 699 Bcf, above year-ago levels.

With a twist of irony that made even the most seasoned traders shake their heads, natural gas futures rebounded strongly yesterday afternoon, just moments after fresh storage data was released showing that the year-on-year storage deficit has finally been eliminated. With that the market broke a string of seven-straight Wednesday losses as traders propelled the new prompt month July contract up 17.1 cents to close at $3.981.

With a holiday weekend spent mulling sub-$4.00 natural gas under their belts, traders at the New York Mercantile Exchange wasted little time taking the June contract for one last ride lower Tuesday, as they demoted the prompt month through several levels of support. By virtue of its $3.738 final closing price, the June contract limped off the board with a 23.5-cent loss for the day, resting a whopping $1.203 lower than where it was when it began its tenure as prompt contract at Nymex a month ago.

Fueled by continued below-normal temperatures and amidconflicting weather forecasts, natural gas futures galloped higheryesterday as institutional investors covered short positionsestablished over the past two and a half months.

Traders made it two in a row yesterday at the New YorkMercantile Exchange as they covered shorts and bid up natural gasprices for the second straight session ahead of cooler weatherexpected next week.