Entering the Thanksgiving semi-shortened holiday week, December natural gas futures wasted no time on Monday exploring the lower end of the recent $7.500 to $8.500 trading range. The prompt-month contract recorded a low of $7.785 before closing out the session at $7.787, down 21.4 cents on the day.

“We are chopping around in the recent trading range and responding to minor shifts in the temperature outlook,” said Tim Evans, an analyst with Citigroup in New York. “We are really looking at these weather updates through a microscope for some pressure on prices in either direction. In order to really move this market, we are going to need to see some significant news.”

The 20-cent-plus drop kicks off a week that is likely to see some interesting trading patterns, especially with the New York Mercantile Exchange’s (Nymex) 2007 schedule that permits electronic trading on Thanksgiving and floor and electronic trading on Friday.

Traders have said that they expect trading volumes to be small leading up to Thanksgiving, with especially light activity on the Friday following the holiday. Nymex’s long-held holiday schedule received a trimming this year, much to the chagrin of energy traders. In an interview last year following Nymex’s 2007 holiday schedule release, one broker said the move “shows the need for greed” (see Daily GPI, Dec. 21, 2006).

This year Nymex will trade electronically on Thanksgiving, and after being closed on the Friday that follows Thanksgiving for a number of years, the exchange floor this year will now be open on that day. The trading floor will close early Friday at 1:30 p.m. EST.

Evans said he expects the market to be looking at light volume on the day after Thanksgiving. However, he added that “light” volume is not “zero” volume. “There is some risk of price movement and I don’t know how people taking Friday off want to go about it. Maybe they want to go home long volatility in the options. What really is the trading strategy in that regard?”

The analyst added that the reduction in holidays is a symptom of the market’s continual evolution. “We have to more or less adapt to this brave new world where trading is possible 23 hours and 15 minutes per day. The question is how do you adjust to that?” Evans asked. “There is a range of implications. The energy industry is handling more and more of its trading volume electronically and down the road we will likely move to an electronic settlements process. For mental health, energy market players are going to have decide what days they are going to participate in the market and what days they don’t. The problem is as electronic trading continues to account for a larger percentage of action, we can no longer close our eyes and pretend that the market is not open.”

As for the current natural gas futures market situation, the trendless movement has traders frustrated. Just when it looked like natural gas was going to follow the petroleum complex higher, the two markets decoupled and natural gas stumbled. As soon as inventories reach record levels it seems a forecast for cold weather boosts the market.

Market technicians who follow the ups and downs of natural gas prices rely on matching the behavior of gas futures prices to cyclic models have firm price points in mind on when the bullish or bearish camp will dominate. Walter Zimmerman of United Energy is looking at $7.635 in December futures as a key price level. Following the hefty 30.1-cent advance Friday by the December contract to settle at $8.001, a reassessment was in order to determine whether bulls or bears were prevailing. “The key support separating the bearish and bullish outcomes from here was the $7.635 level as the 0.7862 retracement of the $7.505 to $8.123 rally,” Zimmerman said.

He added that in order for the bears to prevail in the near term, December futures had to stay below the $8.250 to $8.270 zone. And for the bulls to be in control prices had to close over $8.455.

Weather bulls have their sights on a massive invasion of cold arctic air due to arrive by midweek. “Things will be changing quickly on Tuesday with a cold front sweeping south and east from the northern Rockies,” said AccuWeather meteorologist Meghan Evans. The cold air is forecast to envelop Chicago, St. Louis and Dallas by Wednesday and it will help to drop temperatures drastically into the southern Plains and Midwest on Thanksgiving Day.

The bulls are ready for the cold. Phil Flynn of Alaron is long January natural gas at $8.080 but suggests using a stop loss order at $7.970. January futures settled Monday at $8.147.

Other news and notes on the shortened holiday week involve the Energy Information Administration, which will release the natural gas storage report for the week ended Nov. 16 a day earlier than normal on Wednesday at noon EST.

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