Repealing a portion of the gains achieved in last week’s four-day price rally, natural gas futures shuffled lower Friday, as traders pressured prices lower in sympathy with softer weekend cash market values. The November contract closed at $2.43, down 10.1 cents for the session, but 20.3 cents above its closing point from the week prior. Estimated volume was again healthy for a Friday, as 65,418 contracts changed hands.
For many traders polled by NGI, Friday’s price decline came as no surprise. By notching a new three-week high at $2.57 Thursday, the prompt month had moved convincingly off its $2.208 low notched Oct. 1. However, technicians were not satisfied, and insisted that in order for the rally to be sustained, the November contract needed to fill in chart-gap resistance up to $2.595 level. When the market opened lower Friday, the sellers never looked back.
Also weighing on futures prices were cash prices, which tumbled Friday in reaction to forecasts for continued benign weather this week, as well as the usual weekend reduction in industrial demand. NGI’s Henry Hub index for the weekend is $2.31, down 10 cents from Friday’s mark.
Looking ahead, the market’s ability to trade in positive territory for the majority of last week may actually contribute to its downside potential, market watchers agree. Likening the futures market to a slingshot, futures broker Jay Levine of Advest Inc. notes that the largest moves in commodity market are almost always preceded by a period of development in the opposite direction. “The farther you pull back, the farther it goes,” he said.
Ed Kennedy of Miami-based Pioneer Futures agreed, adding that in order for the bulls to save their positive work from last week, they need to keep the market above $2.30. “If we get a close below support at $2.30, [the market] will move to new lows like a hot knife through butter.”
On the fundamental side of the market, the news is not much better for bulls. To go along with forecasted mild temperatures extending almost to the end of the month, the market may be forced to digest a another bearish storage report this Wednesday. Last year at this time the American Gas Association announced a injection of 29 Bcf, which will likely be surpassed by this week’s figure. The five-year average injection for this week is 46 Bcf. However, those Wednesdays spent in anticipation of the weekly release of storage data may be numbered. Citing an increasing amount of staff time and effort required to calculate and post the survey estimates, the AGA said Friday it will no longer publish the storage report after Jan. 2, 2002 (see related story this issue).
According to the latest Commitments of Traders report released Friday by the Commodity Futures Trading Commission, non-commercial traders increased their net short holdings by 819 to 25,383 positions for the week ending Tuesday, Oct. 9. That follows a slight decrease in shorts for the group from the week ending Oct. 2. The behavior of the non-commercial segment of the market (sometimes referred to as trading funds) is closely watched by brokers and traders alike, because of the group’s ability to sell ahead of down-markets and buy ahead of uptrends.
Since establishing a net short position on Jan. 2, 2001, the non-commercial segment has watched the market move almost entirely in its favor — from $10.00 down to $2.20. However, they will not stay short forever. The last time they held a large short position was for the eight month period spanning from July 1998 through March 1999. Then, from February, 2000 through December 2000, they were long as prices rose to the all-time commodity high of $10.10 on Dec. 27.
©Copyright 2001 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.
© 2020 Natural Gas Intelligence. All rights reserved.
ISSN © 1532-1231 | ISSN © 2577-9877 |