The May Nymex contract continued its spirited dive into lowerterritory Thursday by falling another 7.0 cents to settle at$3.328. May has now lost nearly a quarter since Tuesday, andestimated volume has totaled more than 250,000 contracts over thelast two days. “The amount of trading volume has been incredible.Of course, open interest had been at an all time high, so theseheavier trading days should be expected. Much of this is the workof speculative funds who continue to take profits and exit theiropen positions ahead of May’s expiration next Tuesday,” a sourcetold GPI.
Considering this heavy volume, perhaps it is not surprising Mayfell so far so fast. However, one technician feels a change indirection may be in the cards. “The hourly chart had been in aclear downward trend since Tuesday morning, but the falloffsubsided just after 11:00 a.m. (EDT) this morning. May pretty muchtraded between $2.30-35 for the rest of the day, so perhaps thissideways trading suggests the selloff may have ended,” he said.
Maybe, but maybe not. The afternoon sideways range is nodifferent for a hourly chart from that for a daily chart, anotherchartist mentioned. Because of that, “prices could continue to godown just as easily as they could turn back higher,” he said.However, an analyst feels May has likely found its bottom. “Pricesare now near first of the month indices for May. There is still aweek of April left. If prices drop much lower, LDCs could take lessthan their maximum daily quantities (MDQs) from their bidweekcontracts and buy incremental gas. But that should drive spotprices back higher, especially since utilities have been injectinggas like crazy lately,” he said.
Ironically, many sources point to that heavy storage buying forthe reason why prices fell in the first place. Another analyst saidthe AGA’s weekly storage estimate of 54 Bcf worth of injections washigher than industry expectations. Furthermore, he noted theyear-on-year surplus now stands at 306 Bcf, which is the highest ithas been for the year. “Obviously, this has many sellers concernedthat there will be enough extra supply lingering around if supplyproblems and expected extra demand do not develop this summer,” hesaid.
Now that May has settled below support at $2.33, look forimmediate support at yesterday’s $2.30 low, followed by majorsupport in the $2.24-25 area, one of the aforementioned technicianstold GPI.
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