After taking a break to explore the upside on Thursday, January natural gas futures on Friday resumed their assault on psychological support down at $7. The prompt-month contract reached a low of $7.120 before closing out the week at $7.155, down 17.5 cents from Thursday’s finish and 24.7 cents lower than the previous week’s close.

“We had a minor resistance barrier right around $7.400, which we penetrated briefly on Thursday before closing below it,” said Steve Blair, a broker with Rafferty Technical Research in New York. “I think part of that run-up Thursday was on some changing forecasts in the Midwest, which seems to be the norm recently as forecasts are flip-flopping. On Friday we started with a very steady but persistent move lower before hitting a quick five-minute bounce just before noon EST. There was no news out that I could see, so the only thing I can think of is that somebody came in and had a little buying to do around the $7.150 area, which sparked a little bit of short-covering before we came right back down again.”

Blair said the week’s activity definitely cemented $7 as significant support. From Monday through Wednesday the January contract bounced off of daily lows of $7.060, $7.080 and then $7.100. “Support is currently holding up right around that $7 area. We made a run at that price level four times during the week, but there appears to be a psychological hang-up to breaking below $7,” the broker told NGI. “If we do end up getting below that, $6.800 is our first major support level, followed by $6.640-6.650. I don’t know if we are going to get that low, but I think we’ll have a better idea when we see the weather forecasts Sunday night and Monday morning.”

Blair said with noncommercial short positions numbering about twice as many as the longs, he would have to say that the bears are currently in control. However, he said he doesn’t see a whole lot of direction in this current trading range. “I think we are kind of hanging in an area between $7.050 and $7.450. We might be stuck here until we get something conclusive newswise to push this thing in one direction or the other. That said, if we get below those lows from Monday, Tuesday and Wednesday, I think it is going to be pretty hard to keep this market from breaking lower.”

Blair added that storage levels continue to help the bearish case despite Thursday’s larger than expected withdrawal for the week ended Nov. 30. During the week, 88 Bcf was removed from underground storage, but the 3,440 Bcf that remains is still 32 Bcf higher than last year at this time and 273 Bcf above the five-year average of 3,167 Bcf.

“This week’s lack of upside initiative in both the futures and the spot market is noteworthy given the extremely cold temperature patterns that have enveloped much of the Midcontinent region,” said Jim Ritterbusch. He added that the market appears to be focused on a shift back to normal patterns by mid-month, a trend that could well be extended through much of the winter period.

The National Weather Service’s January-March forecast calls for above-normal temperatures for most of the country. South of a sinuous line extending from central California to South Dakota to northern Michigan to northern New Jersey is forecast to enjoy above-normal temperatures. New England is forecast at equal chances of below- or above-normal temperatures, and the northern Plains and Pacific Northwest are expected to have normal temperatures.

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