Gas Petrospective – September 17, 2010
Natural gas prices were up another 6.7 cents per million Btu in the front-month October yesterday, while second-month November was up 4.7 cents and December gained 3.0 cents. It turns out that we had heavy short-covering in the expiring October contract (Tuesday, September 28th), with another 15,000 contracts removed on Wednesday, when October prices were up 2.9 cents per million Btu. November open interest increased on Wednesday, as it had on Tuesday (when quotes were unchanged), when the contract gained 2.2 cents (mmBtu). The bottom line is that traders, and almost certainly, investors, were covering shorts in October this week, while those looking to establish long positions were buying contracts outside the expiring front month. That is typical, but it tells us that October almost certainly has a selloff in its cards between now and a week from Tuesday.
Needless to say, it has been the strongest week, here, in natural gas, for an extended period. But, yesterday’s advance was especially impressive and lent credibility to the move higher over the longer-term, because it came after a bearish EIA underground storage report. It has been almost unheard of this year for prices to show the kind of resilience we saw yesterday, after even a neutral storage report. Yesterday’s EIA report was the most clearly bearish report seen since last spring.
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