Shrug

While many expected a bearish storage report (78 Bcf ofwithdrawals) to result in further declines in the March futurescontract on Thursday, the opposite took place. Borrowing a phrasefrom Federal Reserve Chairman Alan Greenspan, one trader said”irrational exuberance” took over at the New York MercantileExchange yesterday, which pushed the March contract up 6.4 cents tosettle at $1.829.

All the ingredients were present for natural gas futures tocontinue higher yesterday: momentum from last week’s advances,single digit temperatures in much of the West and Midwest and achart gap that was “just waiting to be filled.” But all of thosefactors, plus the official start of winter, were no match for theoverabundance of stored gas. After a brief attempt at last week’shighs the market came under strong selling pressure on Monday. Theprompt January contract slipped 12.7 cents to settle at $1.947.

For the second day in a row Friday, the futures market was ableto shrug off sizable losses in the physical market to trade oneither side of unchanged. No fresh news was seen to inspire theNovember contract outside its unusually narrow 3 cent trading rangeand the market was left to settle at $2.164, a 1.2 cent loss forthe day.

Cash was king for most of the month of June; oftentimes tradingat a premium to the Nymex futures contract. But that seems like adistant memory as cash prices shrugged off some of the season’shottest temperatures to slip, for the second day in a row, by up to5 cents almost across the board. While some traders expressedsurprise at the weakness, others said this is a sign the Nymexscreen is regaining control of market direction.