Gas Petrospective – July  28, 2010

Natural gas prices rallied 6.3 cents yesterday, in another trading session that could have gone either way and – at various times yesterday – did. Fresh weather reports scotched the idea that autumn might be coming early, after watching everything set up from March until now about a month ahead of time. Obviously, we are talking about temperature-influenced rather than daylight-influenced events.

And temperature projections returned to hotter, more humid readings into the first 10 days of August. And, even with moderated readings in the Northeast, readings are still very hot across large tracts of the country. Technically, prices look like they want to move higher, and there is the very strange relationship between funds being long oil and short gas. We do not know if the two are on as spreads, or if it just happens that some funds are long oil while others are short gas. In any event, we have noticed an odd dynamic at work. At the beginning of declines in oil markets, natural gas prices tend to rise, often on short-covering. As time passes, both seem to fall in a more general liquidation of assets.

Yesterday was only the second two-day move over the last 10 sessions. If prices advance again today, it will be the first three-day run in two weeks or more. Traders are still leery of tropical storm activity, even though it has been something of a slow or even ‘disappointing’ storm season to date. August and September typically experience the most numerous and dangerous hurricanes.

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