Upside

As much of the eastern half of the country continued to freeze, natural gas futures bulls on Tuesday were a little skeptical of making another run to the upside so soon after the March contract was rebuffed by the psychological $8 level in overnight trade on Sunday. On Tuesday, the prompt month traded within a $7.460 to $7.730 range before settling at $7.616, down 1.8 cents from Monday’s close.

February settlement-day bears apparently went back into hibernation Tuesday as March natural gas futures broke back to the upside, soaring 80.3 cents to end the day at $7.740, and crude oil futures jumped $3/bbl.

Consolidation of Canadian exploration and production (E&P) players could be in the offing, and there is potential upside from increasing long-term price expectations as well as a rerating of various companies’ stocks to reflect their “abnormally large resource potential,” UBS Investment Research analysts said in a Monday note.

In its first action as prompt month, February natural gas futures bounced off a $6.090 low in Wednesday overnight Globex trading and continued to explore the upside in Thursday’s open outcry trading session. The contract reached a high of $6.365 on light trade before settling at $6.248, up 10.6 cents on the day.

Following repeated failed attempts to bust out to the upside earlier in the week, exhausted traders were comfortable with doing not much of anything in quiet trading on Friday. After trading lower in the overnight Thursday Globex session, December natural gas maintained a slim 14-cent range Friday before closing at $7.794, down 16.1 cents on the day and 9 cents lower than the previous week’s close.

After exploring the upside in morning trade and notching a $7.720 high, November natural gas futures collapsed in the afternoon, recording a low of $7.060 before expiring at $7.153, down 34.4 cents on the day and 8.8 cents lower for the week. December natural gas, now the front month contract, closed Friday 24 cents lower at $7.827.

October gas futures gapped 10 cents to the upside at the opening bell Tuesday, leading some to believe a solid bounce would continue higher off Monday’s significant $5.440 low, the lowest a front month has traded in nearly two years. However, the front-month contract reversed course in morning trading and ended Tuesday down 9.6 cents at $5.574, just above a daily low of $5.560.

Following the 79.2-cent combined drop from Monday and Tuesday, August natural gas futures on Wednesday decided to explore the upside for a change. After reaching a high of $5.930 in afternoon trading, prompt-month natural gas settled at $5.862, up 30.7 cents on the day.

After failing to break out to the upside on Monday, natural gas futures traders pushed the prompt month contract lower Tuesday, breaking below what some market participants thought to be a double bottom at $7.120. May natural gas put in a low of $6.970 before settling at $7.065, down 17.9 cents on the day.