Gas Petrospective – August 17, 2010
Natural gas prices dropped 10 cents per million Btu yesterday, and the decline in open interest on Friday (when prices rallied 3.2 cents), after several sessions of open interest increases, suggests that it had been nothing but short-covering going into the weekend. It may have been quiet (on the tropical storm front), so far, but we are still coming into the heart of tropical storm and hurricane season, and that is a very good reason for shorts to cover going into the weekend. All it takes is one badly tracked storm to gather up speed and moisture over the warm waters of the Caribbean or US Gulf, and what has been a quiet season can quickly become a catastrophe for those in its path and potentially for any oil facilities it may pass over.
In the process of dropping yesterday, which we expect to learn today was because of heavy fund selling again, prices fell to their lowest level since late May (May 27th). Traders were talking about cooler, more moderate temperatures moving east, and they raised the specter of approaching shoulder months and a period of lower consumption ahead. It has been the warmest year, so far, on record, and that could extend the cooling demand into fall, but we may be just four or six weeks away from cooler weather.
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