Gas Petrospective – September 29, 2010
Natural gas prices were up 3.7 cents per million Btu yesterday as traders covered shorts and were looking for bargain purchases. Technically, nearby futures found support on the Bollinger Bands near yesterday’s lows, and traders were covering October shorts rather than stand to make delivery of the expiring contract.
It is difficult to tell if there was anything in yesterday’s price activity that we can ‘take away’ from it for use at a later stage. We have seen bargain-hunting under $3.80 before, but with the switch-over to the November contract as the front month, prices will jump more than 11 cents just by changing months.
At the same time, the popular December contract is now the second month, and it is often a month used by commission houses and old-line speculators or traders. But, it is 33.5 cents higher than yesterday’s final October settle. That makes it a tougher buy as a bargain.
We are not going to get any real help from the demand side for a while, and we are realistically about two or two-and-a-half months away from any concentrated heating demand. This market prefers heat or cold to be present in New York (or Boston), Chicago (or Detroit) and Houston (or Dallas) all at the same time. If it is cold in the Great Lakes and upper Midwest, the Northeast or New England and in Texas, then the gas market has a real reason to get excited. That kind of cold is certainly at least two months away.
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