It looked like an “after-Christmas sale on natural gas,” one analyst observed, as January futures plunged below the psychological $6 level in overnight Globex trading and continued the trend during Wednesday’s open outcry session. In its last day as front month, the contract recorded a low of $5.740 before expiring at $5.838, down 27.5 cents on the day. The February contract shed 19.1 cents to close at $6.142.

Citigroup analyst Tim Evans noted that while the price movement has been significant over the last few trading sessions, the volume has not really been that impressive because a number of people are on their end-of-the-year vacations.

“Last Thursday we only did 79,933 contracts, which is below average at this point,” said Evans. “On Friday the Nymex volume was 38,039 contracts and on Tuesday of this week it was 79,088 contracts. If it weren’t for the fact that we’re coming into the contract expiration, those numbers would have been even lower. We are certainly having an after-Christmas sale on natural gas, but it is not necessarily as material as if we were working with a full house with larger volumes.”

Evans noted that the weather picture remains bleak for the bulls for as far as the eye can see. “There is not one region with below normal temperatures in any of the National Weather Service forecasts through March 2008,” he said. “Obviously much can change between now and next winter, but those forecasts are completely bearish. There is really nothing out there in the way of a life raft for the bulls to even cling to.”

Looking at historical comparisons, Evans likened the current price cycle to the one from December of 2000 through January of 2002. “We had a December 2000 high of $10.10; then we hit $1.76 in September 2001. We then bounced to $3.44 in October 2001 and fell back down to $1.85 in January 2002,” he said. “In this current cycle, we hit $15.78 in December 2005 and then crashed down to $4.05 in September 2006. We then bounced to a November peak of $9.05 and the question is do we now retest that $4.05 low. That question will be answered in January. If we were to get below $4.05, then we’d be talking about price levels not seen since early 2003.”

Prior to Wednesday’s session, Jay Levine, a broker with enerjay LLC, said Tuesday’s 50-cent-plus drop in futures was just the latest signal that there is no demand and that the market is weak. “It should be noted, beyond the inherent bearish fundamental facts before us (heck, walking around Portland, ME [Tuesday] night at the end of December and the beginning of winter in 50-degree temperatures tells you all you need to know) that a large percentage of market participants are likely out on extended holiday leave,” he said. “I suspect up to 75% of my clients, based on conversations (or the lack thereof) clearly sends the signal to keep decision making extra-wide as the market remains extra-wild.”

In other news, traders will have to wait an additional day for fresh storage data. Due to the Christmas and New Year’s Day holidays, the Energy Information Administration announced last week that the storage report for the week ending Dec. 22 will be released on Friday, Dec. 29; and the report for the week ending Dec. 29 will be released on Friday, Jan. 5, 2007. Both reports will be released between 10:30 a.m. and 10:40 a.m. EST.

Also, in the wake of former President Gerald Ford’s passing, it was not known whether Nymex — which observed two minutes of silence Wednesday in his memory — would close on the day of Ford’s funeral. The exchange has closed in the past for a day of mourning upon the deaths of former Presidents Reagan and Nixon, a Nymex spokesperson said. Ford will lie in state in California and Washington, DC before interment Jan. 3. It is likely Nymex will follow the lead of the New York Stock Exchange, sources said.

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