Natural gas markets fell rather hard during the day on Thursday, as the inventory numbers came in roughly as we expected. Because of this, there was no further catalyst to continue going higher in what is already in the overbought market. I think that the market probably pulls back towards the $3.20 level, perhaps down to the $3.15 level in general. Overall though, I think that we are in a seasonably positive time of year, so of course natural gas markets should continue to find buyers at lower levels. However, when you do get overbought like this you need a little bit of a pullback, if for no other reason than to collect profits.
I believe that the $3.00 level will be the “floor” in the market, and therefore if we were to break down below there it would be very difficult to continue to go higher at that point. That would be an extraordinarily bearish sign and we would probably unwind to the $2.75 level. We could break above the $3.35 level, but at this point I think that area is offering a massive amount of supply that we simply struggle with. I think what we will need to break above that level is some type of inventory figure that comes out much more bullish than anticipated, or perhaps a cold snap that offers us an opportunity to see more burned of natural gas, and of course more demand. I’m looking for value at lower levels at this point.