Natural gas rallied on Thursday after the release of a generally in line storage number (172 Bcf draw) reaching as high as $9.05 before retreating to close the day down 7.4 cents to $8.891. The decline came amidst falling crude prices. Have we seen the near term top for natural gas prices? I can't tell you that. Since I'm long UNG $40 and $42 March puts I'd like to know the answer to that question more than most people watching American Idol right now.
But that's neither here nor there. What we do know is that:
- as of last Tuesday there was a record short position in NYMEX natural gas futures and options. We get a fresh set of figures Friday afternoon and even T. Boone Pickens admitted to being short gas at current levels.
- at least one hedge (and almost certainly more) got into trouble on the short side
- it's cold outside and forecast to stay that way for at least 10 more days
- it's not as cold as last year
- as of last Friday, natural gas in storage had fallen for a second consecutive week vs year ago levels (see the second graph below).
- next week's gas storage report will go up against a 145 Bcf comp from the week one year ago,
- comps get smaller (easier) from here on out.
- so if the cold lingers, gas could remain supported even at current levels.
