Gas Petrospective – October 4, 2011
Natural gas prices were down 4.9 cents per million Btu yesterday, as the general asset liquidation was in full force here, as well. There was one difference; traders are now getting short as well. That is even more bearish, theoretically, because traders will start to see the short trade as their bread and butter again. We went through a number of years with that as the market’s operable underpinning and it looks like we will see it again here.
The selling yesterday gave us new 11-month lows, which is what we have been seeing in the euro, equities and oil prices. This is hardly a coincidence. Last week’s selling established the movement lower as the hardened trend; this week’s selling is taking advantage of it. Curiously enough, this new short-selling might help prices generate a real rally, if we get enough short-covering/profit-taking at the same time.
Traders were selling as part of the general asset liquidation, and they were selling because of bountiful supplies and poor demand. Part of that comes strictly from a look at the calendar. Another part comes from the latest National Oceanic and Atmospheric Administration forecast, which is calling for moderate autumn readings. At one point, NOAA had been predicting cold temperatures across large parts of the country in October. At this stage, we may see some scattered heat spikes in the South next week … but after that, it is expected to be mild across the country.
We noted yesterday that the EIA reported last week that natural gas production in the lower 48 states has hit a new record high. Baker-Hughes reported on Friday that there had been an increase of 11 in the number of active US gas rigs (923) in the most recent week.
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