After etching out its daily trading range during the first 45minutes Friday, natural gas futures limped lazily sideways for therest of the session, as traders elected to stay mostly on thesidelines ahead of the 4-day holiday weekend. The August contractfinished 5.3 cents stronger at $4.476 in a session that saw lessthan 40,000 contracts change hands.

“We were expecting a little more downward momentum,” said TomSaal of Miami-based Pioneer Futures. “Looks like we completed mostof our long liquidation ahead of the expiration [last] Wednesday,”he surmised.

And if you thought that last Wednesday’s price move wasspectacular “look out for another round of fireworks [this]Wednesday when Nymex reopens,” warns Saal. “[Traders] will begreeted by fresh weather forecasts and a possibly some directionfrom cash prices. Then the AGA will release its weekly report. [It]should make for some good volatility,” he reasoned.

While it is nearly impossible to predict what the weather andthe cash market will bring this Wednesday, it is never too soon tostart talking about the AGA storage report. That report, Saalpredicts will feature an injection in the 70-80 Bcf range. If he iscorrect, the refill will eclipse last year’s comparable figure foronly the third time since the injection season began in April.

Although not as highly anticipated as weekly storage figures,the Commitments of Traders report was released late Friday.According to the Commodity Futures Trading Commission, thecommercial segment of the market decreased its short holdings by11,528 while decreasing its long holdings 9,978. Conversely,non-commercial or speculative traders increased its long holdingsand decreased their short holdings. The net result — a combinedincrease on the long side for both commercials and non-commercialsof just 2,783 positions (non-reportable positions accounted for theoffsetting 2,783 shorts).

For Saal, these numbers are alarmingly small considering theycame during a period in which the futures market spiked soprecipitously. Released bi-weekly, the Commitments of Tradersreport attempts to capture a snapshot of all of the long and shortpositions held by market participants at the close of trading eachTuesday. On Tuesday, June 20, the July contract closed at $4.107after slipping more than 40 cents that Monday. Last Tuesday, June27, however, the market had staged a complete turn around, andclosed at $4.686, the highest settlement price to date for a promptcontract at Nymex.

So how are prices moving higher, yet no one market segment isincreasing its longs appreciably? “You are in very rarefied air uphere,” Saal reasons. Simply put, it takes less buying (or selling)to produce sizeable price moves.

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