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Traders Mull Shifting Weather Outlook; December Called Flat

December natural gas is set to open unchanged Wednesday morning at $2.37 as traders digest another change in the near-term weather outlook yet study an improving technical picture. Overnight oil markets rose.

Tuesday's market moves largely centered around changes to the more extended forecasts, and overnight models once again shifted, albeit with somewhat less intensity. MDA Weather Services in its morning report said in the 11- to 15-day period, "The forecast trends warmer again today along the East Coast as a cold air mass diving into the Midcontinent will struggle to press eastward. This leaves the East slightly above normal with temperatures in the composite, with the warmest conditions coming in the early half before a return to more seasonal-like levels late.

"In response to a buildup in ridging over Alaska within the six-10 day period, a cold air mass over the Midcontinent provides below and much below normal temperatures from the West to the Central U.S., with the coldest departures being focused in the Rockies."

That cold and just how far it can make it east is the greatest uncertainty in the forecast. "Additional cold risk comes from model guidance from the West to the Midwest. Some models still allow for colder air to reach the East late, but this has been a struggle to progress forward in time," MDA said.

Next week MDA predicts that highs in Chicago will range from 41 to 50 or from 5 degrees below normal to 7 degrees above. Dallas is expected to see highs in the mid- to upper-60s, or 6 to 10 degrees greater than normal.

According to market technicians, the market has made some progress advancing the argument that the $1.948 low posted in the closing days of the November contract marks a low not likely to be seen at least in this market cycle. According to Brian LaRose at United ICAP, "the bulls have two hurdles that they must clear to confirm $1.948 marked a significant low. Those two hurdles are $2.441 and $2.723. Looking forward to the January contract, $2.441 has already been exceeded. We will be watching to see if the bulls can maintain the head start into expiration."

In overnight Globex trading, December crude oil gained 37 cents to $41.04/bbl and December RBOB gasoline rose 3 cents to $1.2647/gal.

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