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Gold/Mining/Energy : Big Dog's Boom Boom Room -- Ignore unavailable to you. Want to Upgrade?

To: energyplay who wrote (75809)	12/1/2006 8:06:39 AM
From: Wyätt Gwyön	Respond to of 206138

After prices dropped, the counterparty would make a lot of money closing the trade, and so they were willing to pay a higher than normal price to buy NG futures and close the trade. that might have been a factor, but otoh there was a lot of "distressed selling", which tends to cause prices to overreach on the downside. you will have distressed selling anytime the trend moves big against a large number of leveraged speculators. how do you know which factor was most important? i tend to think the distressed selling was very important. at least in the equities, you had stocks losing 20-50% of their value in short order. some of the intraday moves were tremendous and suggest the margin clerks were dumping market orders big time.

To: energyplay who wrote (75809)	12/1/2006 6:46:12 PM
From: quehubo	Respond to of 206138

I think you are missing a crucial point. The reason hedge funds were able to bring prices up is because they could sell forward contracts and buy cheap gas in storage. With all the bearish items hitting ng over the last year the prices still held up quite well with storage almost full overall. As long as there is contango in the ng strip and a wide margin between the Winter strip and HO prices these players are going to be speculating on closing the gap between HO and the Winter month contract. Or even going higher. If they were not picking up prices demand would have been higher and we would be more prone to spikes. The fact that so many lifted the fill season prices with aggressive buying for storage helps ensure we dont have a spike in the Winter.