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Waiting for Withdrawals, Bulls Bide Their Time
With little in the way of fresh fundamental news Wednesday, futures traders remained mostly on the sidelines, waiting for fresh storage data to be released Thursday morning. After gapping higher at the opening bell, the December contract could not hold gains yesterday and quickly fell back into the low $3.80s. Strip-buying was seen for the second day in a row, but it did little for the December contract, which closed with a 2.9-cent decline at $3.854.
Since making a key reversal pattern on the weekly chart on Oct. 25, the natural gas futures market has been in a sell-the-rallies mode. And while yesterday’s early strength hardly qualified as a rally, it did offer traders the opportunity to take some profits and push prices lower. With moderating temperatures beginning to take shape in key population centers in the East and Midwest, demand for physical supplies is expected to weaken throughout the rest of the week, and that weakness was felt yesterday in the futures pit.
Also having a bearish influence Wednesday were crude oil prices, which continued lower on traders’ concerns that OPEC is in an overproduction mode. At $25.77, December crude finished 37 cent weaker for the day and more than $5 off its late September peak of $30.85. While not always tracking in line with crude oil, natural gas lately has been looking for — but not getting — support from its hydrocarbon brethren.
Looking ahead, natural gas will take its first cue Thursday from fresh storage data. Early market expectations range from a bullish 35 Bcf withdrawal to a bearish 10 Bcf injection. The common number is a 15 Bcf withdrawal, which could be neutral enough to allow the market to follow its downward trend. During the same week last year 20 Bcf was injected into storage, and last week the market plummeted 23 cents after an 11 Bcf injection was reported.
However, many market watchers feel that it is too early to discount the winter. They look for prices to rebound on the next forecast for cold temperatures. Also potentially bullish is support in the $3.80-83 area. Should price constructive news develop, the market could use that $3.80-83 base as a springboard to the $4.00 area, technicians agree. On the downside, speculative fund sell stops are believed to exist below December’s low from early September at $3.754. That selling could quickly whisk prices down to the $3.67 area.
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