Natural gas futures exploded higher yesterday as traders weredealt a royal flush of bullish factors that included much belownormal temperatures on the horizon for much of the country and anew storm brewing in the Caribbean Sea. After opening at $2.98, theNovember contract moved higher, piercing resistance at $3.03 beforerelaxing to finish at $3.007, up 8.7 cents for the session.
Several traders were quick to point to the first blast of coldweather that is descending upon northern climes from the Dakotas toMaine this week. Meanwhile, warm waters in the Caribbean Sea haveproduced yet another tropical storm. The National Hurricane Centeryesterday was tracking Tropical Storm Jose, which is expected topass over the Virgin Islands during the early morning hoursThursday. By that time, the NHC predicts Jose will be a category IIhurricane packing 103 mph winds. Although it is still too early totell where the hurricane will hit, it is clear that some riskmanagers are not taking any chances.
However, the bullish news yesterday was not limited to theweather. Also impacting futures market were cash market prices,which continued to gallop higher with several Gulf Coast pointsapproaching the $3.00 level. “Cash is starting to squeeze,” noted aHouston marketer who contends first of month physical shorts arebeing forced out into the market to cover their positions. “Theyhave been holding out with the hope prices would reverse, but it’sjust not happening.”
Looking ahead, many believe prices still have a good deal ofupward potential. Thompson Global Markets, which has been bearishup until this week, now favors prices continuing higher. “With openinterest only just beginning to rise, we think there could be afull cycle of speculative long accumulation still ahead of thismarket. The storage total remains a bearish problem, but wecertainly believe that natural gas traders, who have largelyignored that issue over the past six weeks, can continue to focuson other issues,” the group wrote in its NatGas Report yesterday.
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