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Stay Short, Trader Says; February Called 7 Cents Lower

February natural gas is set to open 7 cents lower at $2.33 Tuesday morning as traders see little in the way of market-moving cold on the horizon. Overnight oil markets rose.

Forecasters are calling for temperature moderation for the latter parts of the month. WSI Corp. in its Tuesday morning report to clients said, "[Tuesday's] 11-15 day period forecast depicts a moderating trend and less anomalous conditions. The forecast is warmer or not as cold as yesterday's forecast over the eastern two-thirds for days 11-14, [and] CONUS GWHDDs are down 4.3 and are now forecast to be 141.1 for the period. Forecast confidence is near average today given the better model agreement during the six-10 day period, as well as reasonably good agreement with the pattern change for the end of the month.

"A more El Nino- or positive PNA- [Pacific North American] driven pattern offers a risk to the cooler side across the southern U.S. The northern tier has a slight upside risk."

Analysts don't see weather patterns going forward as capable of sustaining further price advances. "[W]e are having some difficulty associating nearby gas futures in the $2.40-2.50 zone with updated temperature forecasts that are not indicating any broad-based much below normal temperature trends," said Jim Ritterbusch of Ritterbusch and Associates in closing comments Monday.

"Deviations from average appear modest, and a sizable supply surplus remains in place as a cushion against the inevitable and occasional HDD spikes that tend to develop during the month of January. While conceding that the dynamic of surplus expansion has stalled with Thursday's EIA release likely to come in at about the five-year mark of 178 Bcf, we have yet to see enough production or electric generation response to low prices to maintain last week's price up move. For now, we are maintaining a bearish stance and would suggest holding any short positions established at around current levels with stops above $2.50 in referencing the February contract."

In overnight Globex trading February crude oil rose 12 cents to $31.53/bbl and February RBOB gasoline added 2 cents to $1.1317/gal.

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