After a lower opening failed to attract much in the way offollow-through selling, the natural gas futures market clawed itsway back to post a modest gain Friday as traders were hit a bevy offundamental and technical factors. The January contract closed up1.9 cents at $2.655 while the rest of the strip closed downslightly.

“Looks like we have a balloon full of helium and nobody has anybullets,” said Tom Saal of Miami-based Pioneer Futures to describethe market’s strength last week. “Now the question becomes whetherit can keep up the momentum.” While admitting that the weatherforecast for the rest of the year is certainly price constructive,Saal insists that the market is still in a very precariousposition. “You could certainly make the case for prices moving toeither the $2.00 or $3.00 mark.”

Information overload was another trader’s description followingtwo somewhat contradictory weather forecasts that came on top of analready complicated technical picture. The National Weather Servicescored another one for the bulls Friday when it released its latestsix- to 10-day forecast, which calls for below-normal temperaturesover the eastern half of the country including Texas and NewMexico. Within that large area of expected cold, the NWS looks formuch-below-normal temperatures over a large portion of theSoutheast including much of the Ohio and Mississippi River Valleys.

And while that forecast just about carries us to the New Year, itis the weather of the first several months of the new millennium thathas some observers predicting prices may have reached their winterpeaks. According to the latest 30- and 90-day forecasts released lastweek by the National Oceanic and Atmospheric Administration, the LaNina weather pattern is expected to continue to bring abnormally warmtemperatures to much of the Southern U.S. through March. And whilethis report represents no major change from the report issued onOctober 26, 1999 (see Daily GPI, Nov. 1), it could serve as a reminder ofthe 26-cent price drop that followed that bearish report.

However, the market may have received some late direction Fridayafternoon in the form of the latest Commitments of Traders report.According to the Commodity Futures Trading Commission, commercialtraders have flip-flopped back over to the net short side of themarket after briefly holding a net long position. In Saal’sopinion, that could be an indication that prices will continuehigher. “The commercial segment of the market has a pretty strongtrack record for increasing their shorts during periods of strengthwhile selling into market weakness.”

On the other side of the equation, Saal believes that thenon-commercial traders or speculators may be ready to throw theirhat back in the ring. “Now that they are just about flat, the fundscould be looking to get in on the long side of the market. Forthem, the key is the 40-day moving average, which January tradedjust under [Friday]. If we get a daily settlement or two above the40-day, it could really set the bulls in motion,” he theorized.

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