Natural gas futures chopped sideways for the second straightsession yesterday as traders were torn between shoulder and wintermonth pricing. While the October contract was limited to a tighttrading range and a 0.2-cent advance to $2.632, the Novemberthrough March strip bounded 4.1 cents higher to $2.978. Estimatedvolume was robust with 110,911 contracts changing hands.

“A secondary roll, was the odd way one futures trader explainedthe disjointed price action yesterday at Nymex. “Last week we sawthe market roll out of October and into November. This week, theyare rolling out of both October and November into December andJanuary [2000].” December and January led all months yesterday,closing up 6.1 cents and 6 cents at $3.126 and $3.145 respectively.

Of immediate concern to most traders is the large cash-futuresspread. Many believe weak September physical prices held theOctober contract in check yesterday because as “storage capacitygets tighter, physical supplies get turned back into the market andcash prices are pressured lower,” a Houston risk manager explained.NGI’s Henry Hub index for today is $2.50.

He went on to suggest that futures-cash convergence only needsto happen once a month-when the prompt contract goes off the board.For the October contract, that time will come at 3:10 PM EDT today.”I look for both cash and futures market to do their part forconvergence. Cash will take the lead and I wouldn’t be surprised tosee Henry Hub prices lead the market a nickel higher [this]morning.” The rest of the gap will be closed by the expiringfutures contract, which, he predicts, will fall 5-7 cents.

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