Fueled by hurricane concerns, natural gas futures picked up Monday where they left off Friday as traders continued to hedge against possible supply disruptions in a market already in a delicate supply-demand balance.

After opening strongly at $5.30, the prompt November contract checked sideways and higher throughout the trading session yesterday, closing 16.6 cents higher at $5.352.

Energy trading floors across the country were tuned into the Weather Channel yesterday for the latest developments on Hurricane Keith, which as of press time last night was lashing Mexico’s Yucatan Peninsula with torrential rains, the National Hurricane Center said.

While the storm was expected to weaken to a tropical storm sometime last night, or early today, the chance of it re-strengthening once it moves back into the warm waters of the southern Gulf of Mexico remained strong. The NHC was warning those with interests in the northwest Caribbean Sea, or southern Gulf of Mexico to carefully monitor the progress of the system.

However, the storm that may soon be in the Gulf was only part of the weather picture yesterday. Bull traders were also impressed by the latest six- to 10-day forecast, which calls for below normal temperatures for roughly the eastern half of the continental U.S. as well as the Pacific Northwest. Above-normal temperatures are expected to be isolated in Arizona and New Mexico.

Although they will likely take a back seat to the aforementioned fundamental factors, technicals may come into play this week as traders attempt to make sense of last Thursday’s sell-off. For some, the profit taking and long liquidation seen last Thursday may be just the beginning of a corrective slide that could demote prices well below the $5.00 level.

“I would look to be a seller up here,” said Ira Hochman of New York-based Trot Trading. “Your two key levels are $5.33 and $5.45 and I would be a scale up seller anywhere in that area. Although he looks at several technical systems, his tool of choice is Capital Flow or Market Profile, which was devised by stock and commodity trader Pete Steidlmayer in an attempt to reveal fair market value by comparing price levels versus time.

“If you see strong buying [Tuesday] morning and then fail to get past Thursday’s $5.395 high, I would definitely be a seller. Alternatively if this market can develop above $5.45, then I would look to cover,” Hochman continued.

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