January natural gas futures made another stout gain Tuesday as traders bought contracts in anticipation of continued cold weather.

Longer term, however, analysts doubted that Monday’s and Tuesday’s gains were a sign of any prolonged advance in natural gas prices. At the close January futures rose 14.3 cents to $5.114 and February added 11.6 cents to $5.173. January crude oil continued its trek lower dropping $1.31 to $72.62/bbl.

“I think the natural gas market is in for a sustained period of congestion with the 12-month strip having difficulty breaking above the $6.20 high from October and below the $4.39 low in April. In order for the bears to get in trouble the spot contract has to settle convincingly above $5.57. I wouldn’t be surprised if in the next several months [the strip] remained within those zones,” said Walter Zimmerman of United-ICAP.

He added that from a fundamental standpoint “there is plenty of the stuff, but on the other hand winter is approaching and those two factors may keep the market rangebound.”

In a broader framework Zimmerman pointed out that natural gas is not the only energy market mired in rangebound conditions. Heating oil, crude oil and RBOB markets were all well supplied, and in his view recent petroleum market strength was driven by a weak dollar and strong stock market. “The rally in the stock market has stalled out and the decline in the dollar has stalled out, and with energy amply supplied or oversupplied its not going to go up all by itself. It’s going to need help from a weak dollar or a strong stock market and in the absence of both there is really no upside for energy.”

“But on the strong universal certainty that the dollar is still headed lower and the stock market is still headed higher, no one wants to sell energy either. There is still a feeling that there is no point in selling energy because once the dollar breaks down again, energies will head higher. With the petroleum market stuck, it’s not exactly an inspiration for a breakout in natural gas from here.”

When asked about natural gas being a North American market and thus insulated from the international vagaries of currency movements and trade deficits he said, “it’s still part of the energy complex, and the same people who trade petroleum trade natural gas. It is somewhat independent but there is also guilt by association. How isolated can you really be?

“The big problem I have with being bullish natural gas here is that the October-to-November market decline in the strip counts out as the first leg down of a larger five-wave pattern,” he said. “Those who got used to really big long-term trends in natural gas need to lower their standards of what is worth trading.”

Prior to the open, short-term traders were looking for the market to continue Monday’s 38.5-cent advance, which saw the January contract settle at $5.057.

“I’m thinking that the market trades up to $5.15 in the next day or two and squeezes some more people out. Monday looked like short-covering to me,” said a New York floor trader. “After about another 10 to 15 cents on the upside I look for prices to come back off. The weather has been pretty mild [in New York] the last couple of weeks.”

The mild weather may not last long. According to AccuWeather.com, a huge winter storm will have a wide-ranging impact across the eastern half of the United States through Wednesday night.

The forecaster went on to say that farther east, the messy weather would spread to the interior Northeast early Tuesday evening and through New England into Wednesday. The storm was expected to begin as snow from the northern Ohio Valley to the interior Northeast, before changing to sleet and then rain. Several inches of snow could accumulate from central Pennsylvania to central New England before the change, making roadways very treacherous.

Government forecasts call for near-normal heating requirements in populous eastern energy markets and moderately above-normal heating demands in the Midwest. The National Weather Service forecasts that for the week ending Dec. 12 New England is expected to shiver under 224 heating degree days (HDD) or four fewer than normal, and New York, New Jersey and Pennsylvania are forecast to have 218 HDD, or seven more than normal. The Midwest from Ohio to Wisconsin is expected to see 263 HDD, or 22 more than normal.

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