Gas Petrospective – September 16, 2010

Natural gas prices were up another 2.9 cents per million Btu in the front-month October yesterday, and November was up 2.2 cents with December up .2 cents. We saw very clearly on Tuesday’s session that there had been heavy short-covering in the October contract (some 15,000 contracts) while there had been fairly well matched buying and selling (with 5,000 new contracts added on both sides of the ledger) in the November contract. We are still two weeks from expiration, so we do not see that as a major contributing factor. Instead, we have to believe that the shorts have been spooked by the level of tropical activity lately. Few expect any of these storms to cause problems for production, gathering or distribution processes, but the sheer number of tropical storms raging (three; one storm and two rather severe hurricanes) has traders on edge. The map above illustrates the point.

Yesterday was the fourth session higher in natural gas prices and, while prices are not yet overbought, they are moving away from mathematical support on their daily charts. On the longer-term, weekly charts, prices are still near Bollinger Band support, and there are good reasons to believe that the $3.61 low printed in late August might turn out to be a seasonal low. For some reason, the shoulder months always seem more bearish before we actually are in them. Once we are in those months, traders have a strange habit of almost immediately looking ahead to the next consumption period. In this case, that would be winter, during which we actually see withdrawals from storage.

 Technical Recap

 NG Options Report

Premium Subscribers (click here to register):

Volumes & Open Interest

End Of Day Straddles

Trade Blotter

Settlements