Gas Petrospective – November 29, 2011
Natural gas prices dropped a stunning 17.8 cents per million Btu on Monday, after trying to work higher in the initial trading after the weekend. As it worked out, though, the December contract went off the board yesterday, and that meant that anyone long had run out of time to use it or lose it. A majority of those traders elected to kick out their long holdings rather than take them yesterday.
Natural gas prices had rallied on oversold pressures and on prices reaching support levels. Once they reached those levels last week, all it took was the slightest drop in projected temperature forecasts to cue a good deal of buying interest, which came into the market and helpe to generate buying in gas futures. Of course, once prices did, in fact, rally at the end of last week, all it took was a return to normal along with a desire to get rid of expiring long December contracts to push prices down dramatically.
Last week’s build left us with more natural gas in storage than many were prepared to be able to use this winter, and that helped prices to have the support just pulled out from under them yesterday. The latest EIA figures showed increases in the surplus against both a year ago and against the five-year moving average. This is not yet a market to get long, sit back and hold.
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