Proving Monday’s 49.1-cent gain was all bark and no bite in the momentum category, December natural gas futures on Tuesday plummeted as global economy concerns continue to raise questions about commodity demand strength and weather forecasts continued to shift. The front-month contract ended up closing Tuesday’s regular session at $6.705, down 54.3 cents from Monday’s finish.

“I haven’t quite figured out what is going on here,” said Steve Blair, a broker with Rafferty Technical Research in New York. “Monday’s swing well above $7 might have been a mix of a few things. News of the Chinese economy bailout tied with a number of different weather forecasts calling for much-below-normal temperatures in the eastern half of the U.S. might have had something to do with Monday’s action…but then again they might not have as well. The sell-off Tuesday might have been a result of some of these same weather forecasters backing off of their calls for extreme cold. Most of them are still calling for cold, but they have scaled back their expectations a bit.”

Looking at the recent back and forth nature of the natural gas futures market, Blair said the downside is limited. “I was saying on Monday that if we got any downside action under $7, it is probably your opportunity — if you’re looking to long hedge — to put some more of your hedges on, because I think the downside potential at this point of the year is much more limited than the upside potential,” he said. “The market direction at this point is all about the weather and we are entering winter. Now we haven’t had any real serious cold yet in the East and futures are trading around $7. This is why I’d be hard-pressed to think we would see any handles below $6. I’m not sure we’ll even see prices under $6.50 here, because the chill will arrive.”

Natural gas bulls and bears may have a hard time building a near-term demand case if forecasts by the National Weather Service (NWS) prove correct. For the week ending Nov.15, the NWS forecasts that New England will receive 150 heating degree days (HDD), or 10 below normal, and New York, New Jersey and Pennsylvania are expected to endure 141 HDD, or six below average. The industrialized states of Ohio, Indiana, Illinois, Wisconsin and Michigan are anticipated to receive 172 HDD, or five above average.

Those figures are likely to result in a mid-November standoff relative to storage. The five-year average for the second week in November is for a 2 Bcf withdrawal, and last year no change was observed in storage levels.

Following Monday’s 49.1-cent jump in December futures, one trader’s predictions for prices by the end of the week came true a little early. “I’m not convinced that the market is going higher,” said a New York floor trader Tuesday morning. “I think it trades up to $7.40 to $7.45, but I look for $7 by the end of the week. Maybe $6.50 to $6.75.” He noted that this week’s storage inventory report for the week ended Nov. 7 (moved to Friday because of the Veterans Day holiday Tuesday) was expected to show a strong build of 45 to 55 Bcf.

Weather bulls may have to wait for the third week of November for weather-derived price gains. AccuWeather.com in its six- to 10-day forecast predicts that the entire eastern half of the county, excluding Maine, will see below-normal temperatures. South of an arc from Northern California to Wyoming to eastern New Mexico is expected to enjoy above-normal temperatures.

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