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Nymex, ICE Futures Trading Quiet Due to 'Mixed Holiday'

With Nymex floor trading closed Tuesday in remembrance of former President Gerald R. Ford, electronic trading of natural gas futures on IntercontinentalExchange (ICE) and Globex was light, as many traders chose to extend the New Year's Day holiday weekend by an extra day. In electronic Globex trading, the February contract put in a low of $6.100 and was trading at the day's $6.309 high late Tuesday, up a penny from Friday's $6.299 close.

The cash market was actively traded Tuesday with Henry Hub spot prices for delivery Wednesday averaging $5.3979, down a dime from Friday, according to ICE.

Traders continue to be pessimistic about possibilities for a rally as the weather picture remains unseasonably moderate for large portions of the country, while the storage surplus remains hefty.

Trading of natural gas futures on ICE's over-the-counter platform was also "light due to the mixed holiday," one New York trader said, referring to the fact that the Nymex floor was closed while the electronic markets were operating. "The volume is low, of course, because there are less people participating," he said. "We came in a little weaker Tuesday morning, but then the market came back. I think the reason for that is because there were not as many players as there normally are."

Around 2 p.m. EST, the trader noted that the day's range was $6.090 to $6.265. At that time the prompt month was trading at $6.243. "As far as the big players out there, it seemed like the skeleton crews were in the offices, with a lot of the banks not having people trading today." The trader noted that ICE traders were using Friday's $6.299 settlement again on Tuesday.

He noted that weather remains key in deciphering the market's direction. "It's supposed to be 60 degrees and raining in New York on Friday, which is unusual to say the least," he said. "You have to remember that the January futures contract expired last week at $5.838. Unless there is a major change in the weather, I don't think we'll see much of a move to the upside."

Old Man Winter is rapidly losing his punch. "By about the third week of this month, we look for most of the winter weather premium to be erased from the pricing structure, with the market relying increasingly on supply-side factors for price guidance," said Jim Ritterbusch of Ritterbusch and Associates. He believes that record storage levels are likely to remain in place and that a weak pricing environment is likely to persist through the first quarter. "The physical market will likely stay confined to sub-$6.00 levels this week based on forecasts for temps in the 45-50 degree range in Chicago."

Chicago indeed. Try the entire Midcontinent and Eastern Seaboard. AccuWeather forecasts that Kansas City will see high temperatures of 50, 55, and 53 degrees Tuesday, Wednesday and Thursday respectively, and the normal high is 36 degrees. Philadelphia is forecast to enjoy highs of 54, 56, and 57 degrees through Thursday compared to a normal high of 40.

Ritterbusch is looking for further weakness. "Overall, we are viewing last week's breakdown to new low ground in the February futures as a bearish harbinger suggestive of a further decline to the $5.750 area during this week's trade."

Others agree. Phil Flynn of Alaron says to sell February natural gas at $6.400 with a stop loss order of $6.500.

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