Adding to losses suffered following the release of fresh storage data Wednesday, natural gas futures continued lower Thursday as traders managed to look past the Enron debacle to focus on the wealth of fundamental and technical factors — all of which point to lower prices. Following in the footsteps of the December contract, January shuffled lower in an organized manner Thursday to close with a 17.1-cent loss at $2.561.

Despite the uncertainty in the physical market (see related stories this issue), trading in the pit at Nymex was rather orderly Thursday as the January contract opened just about unchanged before proceeding lower in a steady, session-long sell-off. Several traders contacted by NGI said they were impressed that the futures market was able to move lower so fluidly yesterday, just one day after the January contract spiked to new three-week highs at $3.20 amid the melt-down of market-maker Enron. However it is clear that Enron’s woes, and that of its EnronOnline trading system, had a direct effect on trading at Nymex Wednesday. The exchange announced yesterday that Wednesday’s expiration-day activity set a new all-time volume record at 228,728, surpassing the July 23, 1999 record of 203,807.

“[Wednesday’s] trading session is a clear demonstration of the desire of the trading community for a safe, reliable venue to lay off risk and the recognition by the marketplace of the financial safeguards of the exchange and its clearinghouse that provide a uniquely secure environment,” said Exchange President J. Robert Collins, Jr.

Then, in a memo sent to its member firms, Nymex restricted trading with Enron “unless such Floor Member has received express written authorization from an Exchange Clearing Member carrying an Enron account that such Clearing Member agrees to accept any and all orders placed directly by Enron.”

Looking ahead on the fundamental front, most traders agree prices will continue to slide. In addition to the absence of heating load for the eastern third of the country, the market is teeming with excess gas and that situation does not look like it will change for some time. Citing year-ago withdrawals (158, 158, and 175) that the market has little or no chance of matching going forward, Ronald Barone of UBS Warburg looks for the year-on-year surplus — currently at a record-high 642 Bcf — to balloon to 800 Bcf in the next several weeks.

In daily technicals, January has resistance at previous session highs at $2.76-776 and then again at failed support at $2.81, according to New York-based IFR Pegasus. On the downside, the group looks for the market to find a bottom in the $2.00 neighborhood.

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