Amid a devastating combination of rising temperatures andfalling cash prices the natural gas futures market started the yearwith a crash Tuesday, as commercial and speculative traders alikeliquidated their long positions and added to their shorts. Theprice impact was felt immediately, with the February contractgapping a whopping 10 cents lower en route to a 15.3-cent loss tosettle at $2.176. Despite the sizeable move lower, estimated volumewas a relatively modest 62,491.

With bulls mostly silent, just about the only argument thatcould have been waged yesterday was what was more bearish on prices— the current weather or the weather in the latest six- to 10-dayforecast. No sooner had the mercury risen above 60 degrees Mondayto set record highs in places such as Washington, D.C.; Baltimore;Philadelphia and Newark, NJ, than the National Weather Service(NWS) weighed in with some more price-negative news. For the Jan.9-13 period, the NWS expects above and much-above normaltemperatures from the Rockies east.

“The NWS report set the market into a little bit of a weatherpanic [Tuesday],” said Ed Kennedy of Miami-based Pioneer Futures.”There was good selling from all market segments,” he explainedreferring to trade, fund and local participants.

Although Kennedy believes that the market is definitelysusceptible to more losses this week and points to the $2.08 and$2.01 levels as targets, he warns that selling may wait until afterthe latest storage figures are released this afternoon. Marketexpectations center on a net withdrawal of 130-150 Bcf andrepresent the growing market sentiment that current storage levelswill be more than enough to last the winter. Storage now stands at2,570 Bcf, or 79% full.

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